Banks may see rise in bad loans in Q4, shares fall

The 10-share index BSE Bankex dipped as much as 2 per cent on Tuesday after the State Bank of India, chairman, Arundhati Bhattacharya said bad loans of the bank are expected to surge in the coming quarter, which may hit its profitability.

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Jindal Stainless Ltd (JSL) stocks closed 8.89 per cent up at Rs 26.95 after it said that Odisha Industrial Infrastructure Development Corporation (IDCO) has cleared the transfer of its land to Jindal United Steel Ltd (JUSL) and Jindal Coke Ltd (JCL).

The 10-share index BSE Bankex dipped as much as 2 per cent on Tuesday after the State Bank of India, chairman, Arundhati Bhattacharya said bad loans of the bank are expected to surge in the coming quarter, which may hit its profitability.

Following the statement, share price of State Bank of India (SBI) tanked 6.49 per cent on Tuesday. Other banking majors such as Bank of Baroda (down 6.13 per cent), Punjab National Bank (down 5.60 per cent), ICICI Bank (down 3.24 per cent) and Axis Bank (down 2.86 per cent) also closed in red.

According to market experts, Q3FY16 was undoubtedly one of the worst quarters for public sector banks (PSBs) which were hit hard by the Reserve Bank of India’s (RBI) asset quality review (AQR). Compelled to recognise weak assets as non-performing assets (NPAs) and create adequate provisions to cover them, all PSBs posted a sharp drop in net profit with BOB and BOI reporting huge losses.

Many leading public sector banks, including Bank of Baroda, Bank of India and IDBI Bank, reported their highest ever quarterly losses aggregating to over Rs 12,000 crore, while others like SBI and PNB witnessed sharp erosion in profits.

Bank of Baroda reported a whopping loss of Rs 3,342 crore, the highest ever quarterly loss posted by any public sector bank in the industry.

IDBI Bank recorded a loss of Rs 2,184 crore, while Bank of India posted a Rs 1,505 crore loss for the quarter ended December.

According to Religare Institutional Research, it’s not the end of the tunnel yet as all PSBs (barring BOB) have extended the recognition of RBI-identified weak accounts as NPAs to Q4. While fresh restructuring was limited, fresh slippages spiked to an all-time high with nearly 50-70 per cent arising out of RBI’s AQR. Banks also continued with 5:25 and SDR restructuring, which kept fresh impairments at elevated levels.

(With inputs from PTI)

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