After being bogged down by asset quality worries for more than two years, private sector lenders got a breather in January-March...
After being bogged down by asset quality worries for more than two years, private sector lenders got a breather in January-March quarter having reported no large increase in bad loans. Barring the biggest player, ICICI Bank, most lenders reported steady gross non-performing assets for the quarter.
HDFC Bank, Axis Bank, IndusInd Bank, YES Bank and Federal Bank reported steady gross NPAs. ICICI Bank saw a rise in gross NPAs to R15,097 crore (3.78% of loans) from R10,554 crore (3.4%) in the previous quarter. Bulk of its bad loans came from restructured portfolio during the quarter. Consequently, provisions rose a massive 88% to Rs 1345 crore.
Against this backdrop, ICICI Bank’s net profit showed a growth of only 10%, the lowest in 21 quarters and far lower than its immediate competitor and other peers. HDFC Bank reported a healthy profit growth of 20.6%, Axis Bank’s profit rose 18.36% and that of YES Bank grew 28.07%.
Analysts noted that the guidance for future asset quality from most private lenders was encouraging. Chanda Kochhar, MD & CEO of ICICI Bank, had said that the worst was over and slippages would come down in the quarters ahead. Edelweiss Securities noted that the stress has peaked out. “The bank’s well-capitalised position with Tier-I at 12.8%, stable funding franchise and stressed assets at 4.5% lend comfort,” the brokerage said.
According to Emkay Securities, private banks’ business growth has been at a strong 18.2%, faster than the overall sector. “We expect this trend to persist over FY16-17 as private banks are well-capitalised at present, enabling them to take advantage of likely credit growth opportunities ahead,” the brokerage said.
Private banks had reason to cheer on corporate loan growth front as well, which picked up after more than two years of slowdown. While ICICI Bank’s corporate loan book grew 10%, Axis Bank saw a 23% growth. Corporate loan portfolio of IndusInd Bank grew by a faster 33%.
Indian banks’ loan growth had been hit by slackening demand due to stalled projects and economic slowdown over the last two years. “Though the industrial momentum is slow-paced, we can see steady credit uptick, which would accelerate growth in the coming quarters,” said Romesh Sobti, MD & CEO, IndsusInd Bank.
Another strength of private banks was the continued growth in deposits, but ICICI Bank lagged there too, with deposits growing only 7.4% to Rs 3.6 lakh crore. HDFC Bank gained from strong retail franchise and posted a deposit growth of 22.7%, whereas Axis Bank’s deposits grew 15%.
NII of most banks saw a double-digit growth on the back of stable margins. While for most lenders, margins didn’t see much improvement sequentially, Axis Bank’s margins eroded marginally to 3.81% from 3.93% the previous quarter, while that of HDFC Bank and YES Bank remained stable.