MUMBAI: Subdued March quarter earnings at most Indian lenders belie the prospects of accelerating profit growth in the future, with the industry’s most recent bottom-line performances masking slower addition to toxic assets and higher likely recoveries of loans currently labelled doubtful.
Industry leaders SBI, ICICI BankNSE -0.56 % and Axis BankNSE 0.86 % improved their loan quality with significant reduction in non-performing assets (NPA). On the other hand, retail and corporate deman ..
“Despite the temptation to declare a higher net profit, we have not left anything for the future and provided for all our bad assets,” said Rajnish Kumar, chairman of SBI, explaining the March earnings. “Going into the new financial year, we ensured that our balance sheet was clean.”
Banks facing lending curbs, such as Bank of MaharashtraNSE 0.95 %, Indian Overseas BankNSE -1.14 % and Syndicate BankNSE -3.69 %, also reported reductions in NPA accounts.
Banks earlier faced the unsavoury prospect of seeing a fifth of their corporate exposure turning into bad loans, putting a question mark on the entire sector’s profitability.
IL&FS default's last autumn only served to increase the pressure on banks, which saw their combined exposure of about Rs 90,000 crore turn into bad loans in subsequent quarters.
However, most banks have now finished provisioning for these loans. SBI, Axis Bank and ICICI Bank reported their all-time high Provision Coverage Ratios in the March quarter, seeking to strengthen balance sheets and hedge themselves against long-term NPAs.
“We haven’t seen any major blowout after IL&FS. All practitioners and policy-makers should monitor the space very carefully and banks should work toward improving their balance sheets,” Uday Kotak, CEO of Kotak Mahindra BankNSE -0 ..
Industry leaders SBI, ICICI BankNSE -0.56 % and Axis BankNSE 0.86 % improved their loan quality with significant reduction in non-performing assets (NPA). On the other hand, retail and corporate deman ..
“Despite the temptation to declare a higher net profit, we have not left anything for the future and provided for all our bad assets,” said Rajnish Kumar, chairman of SBI, explaining the March earnings. “Going into the new financial year, we ensured that our balance sheet was clean.”
Banks facing lending curbs, such as Bank of MaharashtraNSE 0.95 %, Indian Overseas BankNSE -1.14 % and Syndicate BankNSE -3.69 %, also reported reductions in NPA accounts.
Banks earlier faced the unsavoury prospect of seeing a fifth of their corporate exposure turning into bad loans, putting a question mark on the entire sector’s profitability.
IL&FS default's last autumn only served to increase the pressure on banks, which saw their combined exposure of about Rs 90,000 crore turn into bad loans in subsequent quarters.
However, most banks have now finished provisioning for these loans. SBI, Axis Bank and ICICI Bank reported their all-time high Provision Coverage Ratios in the March quarter, seeking to strengthen balance sheets and hedge themselves against long-term NPAs.
“We haven’t seen any major blowout after IL&FS. All practitioners and policy-makers should monitor the space very carefully and banks should work toward improving their balance sheets,” Uday Kotak, CEO of Kotak Mahindra BankNSE -0 ..
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