Private lenders’ March quarter provisions more than double their aggregate net profits

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Mumbai | Published: May 9, 2018 2:23:36 AM

The 10 listed private-sector banks that have reported their results for the quarter ended March reported provisions worth over twice their aggregate net profit, according to data from Capitaline database.

private lenders, net profitThe total provisions made by the clutch of lenders in the fourth quarter of FY18 added up to Rs 16,892 crore, more than double their aggregate net profit of Rs 7,559 crore.

The 10 listed private-sector banks that have reported their results for the quarter ended March reported provisions worth over twice their aggregate net profit, according to data from Capitaline database.

The total provisions made by the clutch of lenders in the fourth quarter of FY18 added up to Rs 16,892 crore, more than double their aggregate net profit of Rs 7,559 crore. On a year-on-year (y-o-y) basis, provisions rose by 114% for this set of banks as RBI’s February 12 circular led to several large accounts slipping into theNPA category from banks’ restructured books.
In the same quarter in FY17, the same set of banks had reported total provisions worth Rs 7,906 crore, while their aggregate net profit was higher at Rs 10,563 crore.

The steepest rise in provisions and contingencies among the 10 lenders was seen at IDFC Bank, where the number jumped over 60 times y-o-y to Rs 242.5 crore. The bank has a relatively large share of loans to the infrastructure sector in its book, most of which are legacy assets from its previous avatar as a development finance institution.

The newly-listed Bandhan Bank saw provisions spike 199% y-o-y to Rs 109 crore. Management attributed the jump in provisions to the lingering effects of demonetisation, farm-loan waivers announced by some states and the rollout of the GST and the bank’s own provisioning norms. Bandhan provides 1% against micro-credit loans, while the regulatory requirement is 0.25%.

Among large banks, Axis Bank clocked a 178% y-o-y rise rise in provisions to rs 7,179.53 crore and a quarterly loss of Rs 2,189 crore. The surge in provisions was primarily because of slippages to the tune of `16,536 crore in Q4, of which Rs 13,938 crore originated from its corporate lending book. Shikha Sharma, MD and CEO, said its bad-loan ratios have risen materially over the last two years even though it has been course-correcting in terms of the proportion of corporate lending business. “Clearly, what you will see in the results today is that we do think that we are now nearing the end of the recognition process and we should really start to focus on the resolution process going forward from here,” she said.

Analysts, however, expect some more pain in the quarters ahead for Axis Bank. Investment bank Jefferies said in a recent note, “There was enough motivation for a kitchen sink, which would have been the best outcome, but reporting a full-year loss possibly weighed down on that decision, and now we believe the balance of `9,000 crore will be classified as non-performing loans in the following two quarters.”

ICICI Bank, too, reported a 129% surge in provisions to `6,626 crore as it added `15,737 crore to its gross NPAs, of which `9,968 crore were the result of the withdrawal of RBI’s various schemes for restructuring of stressed assets. Chanda Kochhar, MD and CEO, told analysts on Monday that during FY19, provisions are expected to remain elevated, although lower than FY18.

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