Provisions & contingencies increased at 11 of the 18 lenders, partly due to the slippage of the IL&FS account.
By Aditya Rao
Thirteen of the 18 private sector lenders, which have reported results for the December 2018 quarter, have seen a sequential rise in the gross non-performing assets (NPA).
Nonetheless, their aggregate asset quality was better with the gross NPAs falling 11 basis points (bps) quarter-on-quarter (q-o-q) to 4.21%. Several lenders such as ICICI Bank, Axis Bank, Kotak Mahindra Bank improved their asset quality with gross NPAs coming down.
Provisions and contingencies increased at eleven of the 18 lenders, partly due to the slippage of the IL&FS account. Moreover, there are concerns about the SME sector since some of them are in trouble post the rollout of the GST.
Rajat Monga, senior group president, Yes Bank, told analysts that the bank is now reporting a gross NPA ratio of 2.1%. This represents a growth in NPA book of about Rs 5,100 crore. “The bank is reporting net NPA ratio of 1.18%, or Rs 2,800 crore, of net NPAs. Both these ratios have factored in a Rs 1,900 crore slippage on account of IL&FS,” Monga said.
Analysts at Kotak Institutional Equities observed that Axis Bank’s slippages from the IL&FS group amounted to Rs 300 crore, which is 7% of the bank’s total slippages. While, 98% of overall corporate slippages were from the disclosed BB and below pool accounts, said a statement from Axis Bank.
IndusInd Bank had made a contingent provision of Rs 255 crore on these “standard assets” (advances granted to various companies of IL&FS Group), in addition to an amount of Rs 275 crore made during Q2FY19. Total provision and contingencies for the bank in Q3FY19 stood at `607 crore, said a statement from IndusInd Bank. “Elevated slippages from accounts under IL&FS offset strong improvement in overall asset quality for most banks under coverage (80% of overall slippages for Yes Bank and 7% of slippages for Axis Bank were from accounts under IL&FS),” said the analysts at KIE.
Analysts at Jefferies observed that slippages at ICICI Bank in Q3FY19 from the corporate & SME book were at Rs 1,020 crore. “While no explicit guidance on slippage or credit cost has been provided, but ICICI Bank management is confident of lower slippages in FY19 compared to FY18,” said the analysts.
However, HDFC Bank expects slippages in agriculture segment to be higher in Q1FY20 due to “elections and the pre-monsoon indecision of farmers,” said the Jefferies’ analysts. On the concerns from the SME sector, KVS Manian, president, corporate, institutional & investment banking at Kotak Mahindra Bank, told analysts that “industry averages on NPAs on the sector are fairly high; we need to remain selective but we hope that it gets right in the coming quarters.”
The interest expenses of the private banks saw a rise of 7.9% q-o-q at Rs 55,643 crore in Q3FY19, while the interest income of the overall private banks for Q3FY19 was at `96,354 crore compared to `89,000 crore in Q2FY19, showed the data complied by analysts at Care Ratings.
The net interest margin (NIM) of ICICI Bank grew by 7 basis points (bps) q-o-q to 3.40%, while that of Yes Bank remained flat sequentially at 3.3% and Axis Bank reported an 11 bps improvement in NIM at 3.47%.
Group executive and CEO of Axis Bank, Jairam Sridharan, told analysts post Q3 results that strong NIMs was on the back of write-back of interest reversals “on one large recovery.” The bank recovered `998 crore from written-off account in Q3FY19.
ICICI Bank also witnessed a sequential increase in NIMs in Q3FY19, which was “almost entirely due to interest collection on NPAs,” said the lender in a statement.
The net interest income (NII) of the overall private banks grew 22.8% y-o-y for Q3FY19 to `39,006 crore, while the aggregate net profit of the private banks increased 3% y-o-y to `11,501 crore. Total income during the quarter was up 25.7% y-o-y at `1,11,474 crore.