Private banks healthier than PSBs

Written by Pradip Kumar Dey | Mumbai | Updated: Jun 1 2011, 02:29am hrs
Given that the levels of non-performing assets (NPAs) are the real indicator of the banking industrys health, private banks seem to be in better shape than public sector banks (PSBs).

According to an FE study, PSBs growth of sticky loans have gone up whereas private banks have seen their NPAs falling in 2009-10 and 2010-11.

Even though the collective net profit of PSBs increased from R34,331 crore in 2008-09 to R45,208 crore in 2010-11, net NPAs or NNPAs of 27 PSBs have also gone up by R21,098 crore to R36,340 crore, nullifying the improved performance.

Nine PSBs State Bank of India, Canara Bank, Punjab National Bank, Bank Of India,UCO Bank, Union Bank, IDBI Bank, Indian Overseas Bank and Syndicate Bank have NNPAs between R1,000 crore and R12,500 crore as on March 31, 2011.

Vaibhav Agrawal, vice-president, research (banking), at Angel Broking, said: In the case of PSBs, system-based recognition of NPAs is in fact throwing up even more NPAs and for some of PSBs this will remain a problem even in the first half of FY12, making us cautious on such banks. Even generally, with rise in interest rates, some of the PSBs could continue to see NPAs escalating. There are some PSBs that we like because of reasonably strong fundamentals (lower NPA levels due to conservative strategies) and which are now available at attractive valuations.

The gross NPAs (GNPAs) of PSBs increased by 25.8% during 2010-11 against an increase of 5.7% of private banks. Among PSBs, the highest increase in GNPAs was registered by Punjab and Sind Bank, followed by Andhra Bank.

The average NNPAs to net advances ratio of 27 PSBs increased from 0.73% during 2008-09 to 1.01% during 2010-11. And in the case of private banks, the ratio decreased from 1.31% to 0.45% in the same period.

In absolute terms, 12 private banks have accumulated net NPAs of R3,871 crore during 2010-11 versus R6,972 crore in 2008-09. ICICI Bank, had the highest NNPAs of R2,407 crore during 2010-11, followed by Axis Bank with R410 crore and HDFC Bank with R296 crore.

Among private banks, Federal Bank witnessed a steady increase in NNPAs, from R68.12 crore during 2008-09 to R190.69 crore in 2010-11, followed by Axis Bank.

In the case of 24 PSBs, Andhra Bank recorded the highest increase in NNPAs in 2010-11, followed by Indian Bank, PNB, Punjab and Sind Bank and Corporation Bank. The countrys largest bank, SBI, saw its NNPAs increase by 13.6% to R12,347 crore during 2010-11.

Among the 12 private banks, ICICI Bank decreased its NNPAs to net advances ratio from 2.09% during 2008-09 to 1.11% in 2010-11 and Federal Bank showed an increase from 0.30% to 0.60%.

The top three private banks by the ratio of NNPAs to advances in 2010-11 were ICICI Bank, Development Credit Bank and Kotak Mahindra Bank.

Among PSBs, Union Bank increased its NNPAs to net advances ratio steadily from 0.34% during 20 08-09 to 1.19% during 2010-11 and Vijaya Bank from 0.82% to 1.52%.

The top three PSBs according to the ratio of NNPAs to advances in 2010-11 were UCO Bank, SBI and Vijaya Bank .The highest increase in NNPA during 2010-11 was posted by Federal Bank among private banks and Andhra Bank among PSBs.