Q1 data shows worst may be over for PSU banks

Posted on by KNBT

MUMBAI: Public sector unit (PSU) banks seem to have put the worst behind them. The combined loss of all state-owned lenders has shrunk 74 per cent to Rs 16,614 crore for the quarter ended June 2018 (Q1FY19) as compared to Rs 62,681 crore in the preceding quarter of January-March (Q4FY18).

Private sector banks, too, saw an improved performance. The collective profit of private lenders (excluding state-owned J&K Bank and small finance banks) was up at Rs 9,914 crore for Q1FY19 from Rs 7,393 crore for Q4FY18. The private sector’s improved performance is due to a turnaround in Axis Bank, which reported a net profit of Rs 701 crore for the first quarter of the current fiscal as against a loss of Rs 2,188 crore in the preceding quarter.

TOI has done a comparison of consecutive quarters instead of year-on-year with April-June 2017 (Q1FY18) as numbers from the corresponding period of the previous fiscal are not comparable with Q1FY19 since new rules on bad loans came into force from February 2018.

PSU bank losses appear to have peaked in March 2018 after the Reserve Bank of India’s February 12 circular that forced banks to classify all delinquent loans as non-performing assets (NPAs). While some provisioning still remains, as is reflected in an ‘Iceberg Report’ by the credit information bureau TransUnion Cibil, the share of ‘regular’ loans is finally rising. Lenders have warned of some new power loans slipping into NPAs in the second quarter, but some of this will be offset by the resolution of a couple of large cases in the bankruptcy court.

The other good news in results for the latest quarter is that seven public sector banks have reported profits as against only two in the preceding quarter. Bank of Baroda, with a bottom line of Rs 528 crore, reported the highest profit among PSU banks, followed by Canara Bank (Rs 281 crore), Indian Bank (Rs 209 crore), Vijaya Bank (Rs 144 crore) and Union Bank (Rs 129 crore).

Of these, only Indian Bank and Vijaya Bank had reported a net profit earlier. The other two banks to report a net profit are Bank of India (Rs 95 crore) and Corporation Bank (Rs 85 crore).

State Bank of India continued to have the highest loss of Rs 4,876 crore, which was lower than the preceding quarter’s Rs 7,718-crore loss. IDBI Bank’s loss halved to Rs 2,410 crore from Rs 5,663 crore earlier. Seven banks have gross NPAs of more than 20 per cent of their total assets, of which IDBI Bank’s have crossed 30 per cent — the first for any lender.

According to the TransUnion Cibil report, around Rs 1.72 lakh crore is the non-recognised portion of borrowers who have defaulted on at least one loan. Of this, Rs 1 lakh crore pertains to borrowers who are significantly in default to other lenders. This Rs 1 lakh crore is the additional amount that is likely to slip into NPAs.

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