Thirteen of the 15 listed private sector banks that have reported their results for the quarter ended June saw their gross non-performing assets (NPAs) rise on a sequential basis, according to data from Capitaline.
Thirteen of the 15 listed private sector banks that have reported their results for the quarter ended June saw their gross non-performing assets (NPAs) rise on a sequential basis, according to data from Capitaline. The two lenders that bucked the trend were YES Bank and Jammu & Kashmir Bank, whose gross NPAs fell 32% and 6%, respectively, from the end of the March quarter. The two other listed private banks, City Union Bank and Dhanlaxmi Bank, are yet to declare their numbers for the first quarter. YES Bank saw soured loans fall as the bank recovered 60% of a Rs 910-crore exposure to Jaiprakash Associates subsequent to the sale of the company’s assets to UltraTech Cement. Management has guided for another 15% of the exposure — Rs 137 crore — to be recovered over the next two quarters.
The steepest rise in gross NPAs was seen at South Indian Bank, where the number rose 48% sequentially to Rs 1,696 crore. The rise came as the bank stepped up recognition of bad loans, bringing down its watch-list of stressed assets to nil from Rs 600 crore at the end of March. In a post-result report, brokerage Motilal Oswal Securities wrote, “We believe the asset quality stress has largely been recognised and provided for.”
HDFC Bank saw gross NPAs rise 23% quarter-on-quarter (q-o-q) to Rs 7,243 crore as repayments in its agriculture portfolio turned irregular. This accounts for 1.24% of the lender’s overall portfolio, up from 1.04% at the end of the March quarter. Paresh Sukthankar, deputy managing director at HDFC Bank, said: “The overall increase that we’ve seen of 20 bps (basis points), of that 12-13 bps is coming from agri. 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.”
The accretion of bad loans was relatively slower at the other large private lenders, ICICI Bank and Axis Bank. The former saw gross NPAs rise 1.4% q-o-q to Rs 43,148 crore, as a large recovery in the Jaiprakash Associates account slowed the pace of accretion. Chanda Kochhar, MD & CEO, said most of the Rs 2,775 crore worth of recoveries in the quarter came from the Jaiprakash resolution. Part of the reason for the slower rise in NPAs was that ICICI Bank’s total advances actually recorded a marginal de-growth on a sequential basis because of the bank’s decision to reduce exposure to some stressed sectors.
Axis Bank’s gross NPAs rose 3.5% from the March quarter to Rs 22,031 crore as the lender wrote off Rs 2,462 crore during the quarter. Credit costs rose 22 bps sequentially to 1.95% and management guided for a fall in costs in the year ahead. Analysts, however, seem unconvinced. Credit Suisse wrote, “Management guidance for credit cost to normalise to ~100 bps in FY19 appears ambitious, given non-NPA stress remains at 4.5% and NPL (non-performing loan) cover fell ~400 bps q-o-q to 56%.” The investment bank estimates credit cost to be around 120 bps in FY19.