September quarter results: NPAs and provisions spike for private banks in Q2

Published: October 28, 2019 12:11:23 AM

The aggregate GNPAs for the quarter ended September 2019 for these 11 banks stood at Rs 65,244 crore, higher by nearly Rs 2,000 crore sequentially, reveals data from Capitaline.

This even as banks performed well operationally for the quarter, with pre-provisioning profit growth averaging at 15%This even as banks performed well operationally for the quarter, with pre-provisioning profit growth averaging at 15%

By Hariprasad Radhakrishnan & Shashank Nayar

Private banks have been the darlings of the Dalal Street for long, but the slowdown has not spared them either. Eleven listed private-sector banks that reported their results for the September quarter saw a spike in their stressed asset pool and increase in provisions.

Even as banks performed well operationally for the quarter ended September, with pre-provisioning profit growth averaging at 15%, analysts observe that the incremental stress pool, recognition and provisioning would be factors that the market should look out for going ahead.

“Slow recovery and lack of any major resolution during the quarter implies gross non performing assets (GNPAs) could spike during the quarter. What could make GNPL number look relatively low would be aggressive write-offs,” said Edelweiss Securities in a note.

The aggregate GNPAs for the quarter ended September 2019 for these 11 banks stood at Rs 65,244 crore, higher by nearly Rs 2,000 crore sequentially, reveals data from Capitaline. On a year-on-year (y-o-y) basis, provisions for the same set of banks rose 26.8% to Rs 9,224 crore on the back of heightened exposures to certain stressed accounts. Sequentially, provisions improved 2.2% to Rs 9224 crore largely because of lower provisions by IDFC First Bank in the second quarter.

HDFC Bank, the country’s largest private-sector bank, saw its provisions shoot up by 48.4% y-o-y to Rs 2,701 crore, while slippages in Q2FY20 was elevated at Rs 3,714 crore. Given the sharp slowdown in the auto sector and weakening economic growth, stress has been showing in the commercial vehicle loan segment.

“Anyone going through capacity utilisation issues will bounce back and repay, given the time we will go through the NPA cycle,” said Srinivasan Vaidyanathan, CFO, HDFC Bank. “The bank had stepped up provisioning to cover personal loans, too, in the last quarter,” he added.

RBL Bank saw the steepest jump in GNPAs to 2.6% from 1.4% a year ago. Provisions and contingencies also surged almost three-fold to 281% y-o-y to ?533.30 crore during the quarter. The management said it faced challenges in a few corporate accounts.

“As a matter of prudence, the bank has taken higher than required provisions on these accounts, which have impacted bank’s bottom-line,” it said. Since the announcement of the results on October 22, the bank’s stock has fell by 9.3%.

Even as the GNPAs increased, private lenders saw their loan books grow in double-digits, while there was moderate systemic growth. According to data from the Reserve Bank of India, the system-wide credit growth for the fortnight ended October 11 was at 8.72%, the lowest growth in the past two-years.

HDFC Bank posted a 16.1% y-o-y growth in its loan book, while IndusInd Bank posted growth of 21% y-o-y rise in its advances. Axis Bank’s loan book grew 19%, while Kotak Mahindra Bank and Federal Bank posted growth of 15.3% and 14.8%, respectively.

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