The quality of the assets of former private sector banks worsened in the September quarter of fiscal year 18 along with a sharp increase in provisions. The increase in provisions also led to a drop in net profit for most of these banks, according to data compiled by FE.
For example, South Indian Bank reported a 144% year-over-year (y-o-y) increase in provisions to Rs 455.9 crore in Q2 FY18 which led to a 96% year-on-year fall in net profit to Rs 4 crore. The bank said in a regulatory report that provisions in the quarter included depreciation of Rs 252.39 million rupees because of the decrease in the NAV of investments in security receipts (SR) on the basis of NAV declared by Asset Reconstruction Company. However, the bank’s gross non-performing assets (NPA) remained stable at Rs 1.766 crore in the second quarter, up 1.2% year-on-year.
VG Mathew, MD and CEO of the bank, told reporters after declaring their results that with the incremental provision made, provision coverage crossed 50%, which increases the prospect of recovery. “If the exceptional provision had not been there, the after-tax profit (PAT) would have been Rs 169 crore for the current quarter.” The bank’s operating profit increased by Rs 163 crore (54.9%) to Rs 460 crore, “he added. . Karnataka Bank’s provisions increased 73% y / y in the September quarter from FY18 to Rs 225.9 crore and resulted in a 24.5% decrease in net income over the same period. The bank’s net profit fell to Rs 93.3 crore in Q2 FY18 from Rs 123.8 crore in the same quarter last year.
Deviations from Q2 of Q2 into Rs 374 crore included a large account of Rs 230 crore (housing infrastructure sector) that were downgraded to NPA. Analysts pointed out that the account was previously recognized as SDR and that the bank has adequate provisions in this regard. Its standard restructured loans were Rs 690 crore and along with gross NPA, strategic debt restructuring (SDR) and sustainable structuring of stressed assets (S4A) accounted for 6.5% of loans (vs. 8.6% in FY17). Even the Lakshmi Vilas Bank reported an increase in provisions in the quarter. Its provisions increased 67% y-o-y to Rs 187.3 crore in Q2FY18 and led to an 83% drop in net profit to Rs 10.5 crore.
The quality of its assets also deteriorated, and the gross NPA more than doubled by Rs 1,277.6 million.
Parthasarathi Mukherjee, MD and CEO of Lakshmi Vilas Bank, told a business news channel that the upside was that the bank has a waiting list of accounts it has been monitoring. “I am pleased to see that a large number has fallen in the quarter – Rs 630 crore – was on the watch list. Up to that point, my watch list has been reduced to about Rs 1.7 billion crores,” he said last week. However, the Federal Bank and Banco DCB appeared to have weathered the trend and reported an increase in net income for the September quarter of 31% year-on-year and 21% year-on-year respectively. While the Federal Bank reported a 5% increase in provisions, DCB Bank provisions increased 14% in Q2 FY18.