While NPA ratio doesn?t see a sharp rise, threat of bad loans continues to loom
Public sector banks struggled to manage the impact of the downturn during the January-March quarter, with most large lenders showing a drop in their net profit, owing to higher provisioning.
For India?s largest lender State Bank of India (SBI), net profit was down 18.5% from a year-ago period, due to a 40% increase in bad loan provisioning, which stood at R3,974 crore as on March 31. Bank of Baroda (BoB) and Bank of India (BoI) saw a net profit fall of 32% and 20.6% respectively, while provisions rose 18.5% for Bank of Baroda and 126.5% for Bank of India from a year-ago period. Punjab National Bank (PNB) also saw its net profit fall 20.6%. However for PNB, bad loan provisions fell 12% and other provisions rose nearly 634% from a year ago to R648 crore.
While NPA ratio did not see an sharp rise in the quarter, the threat of bad loans continues to loom with no let off in the pace of restructuring seen in the corporate loan books of most of the public sector banks. SBI restrucured loans worth R8,669 crore during the fourth quarter taking the total restructured book to 4% of the total loan book. The bank was able to bring down net NPA ratio to 2.1% of total loan book, down 49 basis points sequentially.
Nearly 25% of SBI?s restructured loans were slipping into NPA category, noted Pratip Chaudhuri, the bank chairman. ?There are challenges in agriculture, mid-corporates and the small and medium enterprise sector. I think the restructuring problem is also quite serious and the companies that have fallen into this category will be there for a long haul,? Chaudhuri was quoted as saying while talking to reporters after announcing the bank?s annual results in Kolkata on Thursday.
Similarly, PNB?s net NPA ratio stood almost stable on a sequential basis at 2.4% as on March 31. Though the bank?s stock of restructured loans stands at R32,143 crore, or 10% of total assets as it restructured loans worth R6,444 crore in the fourth quarter. Of the accounts restructured, nearly 38% were from the power sector.
Public sector lenders also struggled to maintain their net interest margins. For BoI, cumulative NIM, which includes, domestic as well as international businesses, came down by 40 bps quarter on quarter to 2.46%. BoB, which has a strong international presence, saw its overall NIM contract by 14 bps sequentially to 2.5%. The bank?s overseas NIMs declined 9 bps quarter-on-quarter to 1.5% due to a 34 bps sequential decline in overseas yield on advances to 3.1%.
Bankers are, however, hopeful that net interest margins will stabalise in the current year and most are hoping to maintain NIM between 3-3.5%.
?We are hoping to improve our domestic margin by 10 bps this year. This will be largely because our domestic credit deposit ratio is very less at 69%, which we can improve it to 74% over the next two years,? said VR Iyer, chairperson and managing director, BoI.
