Despite the economy showing some signs of revival, asset quality at some of the country’s top banks deteriorated in the three months to December, reports Pallavi Ail in Mumbai.
Commentary was cautious with bankers saying it was possible the credit cycle would take time to turn in the absence of a pickup in the economy. Corporate results for the December quarter have been very poor with most companies reporting profits that are way below analysts’ estimates.
Among the worst hit was Punjab National Bank which reported gross NPAs of R22,211 crore, a 34% jump y-o-y.
“While one could argue that the macro indicators are suggesting an improvement and PNB would be a direct beneficiary of the same, we are not too enthused to change our view as we are quite surprised at the persistent negative outcomes on impairment ratios,” Kotak Institutional Equities wrote.
While PNB has seen a fresh slippage of 31% in Q3FY15, Bank of Baroda reported a 73% sequential rise in fresh slippages and Canara Bank was hit with an increase of nearly 40%.
Much of the damage took place in accounts in the iron and steel and textile sectors. With the regulations for stressed loans set to become tighter from April 1—they can no longer be classified as restructured assets but must be npas with the stipulated provisioning—banks might use the window to classify a chunk of stressed loans as restructured to benefit from lower provisioning.