Public sector banks’ provisions over 3 times private peers’ profits

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Published: August 15, 2017 4:41:44 AM

Twenty one listed state-owned banks together set aside as provisions more than three times the amount that 17 private lenders earned in profits during the quarter ended June, data from Capitaline database showed.

Public sector banks, Public sector banks in india, private peers’ profits, public sector lenders, NPAs, Arundhati Bhattacharya, Bank of India, IDBI Bank, Central Bank, Indian Overseas Bank, HDFC Bank, agri loan While the public sector lenders made provisions to the tune of Rs 36,696.75 crore, the private sector pack recorded Rs 11,445.11 crore in net profit. (Image: Reuters)

Twenty one listed state-owned banks together set aside as provisions more than three times the amount that 17 private lenders earned in profits during the quarter ended June, data from Capitaline database showed. While the public sector lenders made provisions to the tune of Rs 36,696.75 crore, the private sector pack recorded Rs 11,445.11 crore in net profit. The state-owned bunch reported a net loss of Rs 307.49 crore in the quarter under review, against a net profit of Rs 220.89 crore in the corresponding period a year ago. Provisions made by private banks rose 23% year-on-year (y-o-y) to Rs 8,843.31 crore as bad loans piled up. Aggregate gross non-performing assets (NPAs) at the 17 private banks rose 55% y-o-y to Rs 96, 200.65 crore. United Bank saw the steepest climb in provisions at Rs 758.35 crore, a jump of 175%. It was followed by Syndicate Bank and Oriental Bank of Commerce, where provisions surged 101% and 96%, respectively, on a y-o-y basis.

State Bank of India (SBI), which saw provisions rise 20.5% y-o-y, bore the brunt of farm loan waivers and the expiry of a regulatory dispensation given during the demonetisation move. The state-run lender also took some pain upfront to provide for soured loans coming from its five associates after they were merged with it in April. After the bank’s results, chairman Arundhati Bhattacharya said, “When we got the merger notification on May 17, we started aligning the corporate books of the associates. So what we have done over three years in the associate banks’ corporate books, we had to do it in one year. This resulted in associates making huge provisions hitting their numbers, thereby also impacting the numbers of the merged entity.”

A few state-owned banks — Bank of India (BoI), IDBI Bank, Central Bank, Indian Overseas Bank and Dena Bank — saw provisions falling from their year-ago levels. The reduction in provisioning at BoI came as slippages fell to Rs 4,037 crore from Rs 6,233 crore at the end of June 2016. The bank’s managing director and chief executive officer Dinabandhu Mohapatra guided for a reduction in NPAs in the quarters ahead. Investment bank Nomura, while retaining its ‘reduce’ rating on BoI, wrote, “BoI has been conservative in recognising stress, and hence we think net slippage trends can continue to improve.”

Among private lenders, HDFC Bank saw a surge in provisions, which rose 80% y-o-y to Rs 1,558.76 crore. The management attributed the jump to repayment pressure in its agri loan book, which accounted for 23% of the total provisions. Increased cover for loans to companies in stressed sectors also accounted for some of the increase in provisions.

Deputy managing director Paresh Sukthankar said it would take a while for clarity to emerge on repayments normalising in the agri book. “We’ll have to see how things pan out in terms of there being clarity on what are the waivers and what our customers will be able to repay from those and, thereafter, once they can pay from their own pockets,” he said.

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