While big-ticket loans to large companies, particularly in the metal & mining and infrastructure sectors, turning bad have been at the heart of the current non-performing asset (NPA) crisis in public sector banks, a close look at segmental results reveal that there’s more to it than what the headlines say.
For example, though a negative R3,409.82-crore profit before tax (PBT) in its wholesale banking segment is largely responsible for Bank of Baroda reporting a overall net loss of R3,342.04 crore in Q3FY16, the role that a negative PBT of R1,144.8 crore (as compared to a positive PBT of R785.7 crore in Q3FY15) in its retail banking segment played in accentuating the overall number cannot be ignored.
Bank of Baroda’s Q3 net loss figure would have been much bigger if not for tax write-backs.
The same is the case for Bank of India. While its wholesale banking operations incurring a loss before tax of R2,212.83 crore was primary responsible for the bank reporting a net loss of R1,505.58 crore in Q3FY16, data reveal that its retail operations also incurred a loss before tax of R313.4 crore compared to a PBT of R27.7 crore in during the quarter a year ago.
This, despite higher year-on-year revenue from the segment, which clearly indicates that a significant chunk of the provisions that the bank made this quarter was because of slippages in the retail segment. This is important because both these banks had reported profits before tax in their retail segments both in the previous quarter and the same quarter last year.
Other than Bank of Baroda and Bank of India, three other among the top 10 public sector banks by market capitalisation – Punjab National Bank, Union Bank of India and Indian Bank – have also reported lower year-on-year profits before tax this quarter, indicating that stress is also seeping into the retail book of PSBs.
Though investors are a bit puzzled with this trend, some analysts feel it just might be a function of these banks including their SME assets in their retail segments, instead of their wholesale segments.