Money & Banking

Dena Bank’s Q4 net loss widens

Our Bureau Mumbai | Updated on January 11, 2018 Published on May 09, 2017

Ashwani Kumar (left), CMD, Dena Bank, and Ramesh S Singh, ExecutiveDirector, announcing the bank’s results in Mumbai on Tuesday SHASHI ASHIWAL

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RBI may invoke prompt corrective action as bank breaches ROA and net NPA risk thresholds

With large accounts such as Videocon, Monnet Ispat and Ruchi Soya turning sour for it and no let-up in provisioning burden, Dena Bank’s net loss widened to ₹575 crore in the reporting quarter ended March 31, 2017, as against ₹326 crore in the year-ago quarter.

Further, with the public sector bank breaching key risk thresholds relating to return on assets (ROA) and net non-performing assets (NNPAs), the Reserve Bank of India may invoke the so-called prompt corrective action (PCA), requiring the promoter (the government) to bring in capital, restrict branch expansion, and asking it to make higher provisions.

In the reporting quarter, the bank’s NPAs increased by ₹2,321 crore (₹1,636 crore in the year-ago quarter). NPA provisions were at ₹878 crore (₹1,094 crore).

Ashwani Kumar, Chairman and Managing Director, said his bank has made (loan loss) provisioning as, among others, its ₹520-crore exposure to Videocon (Industries) and ₹125-crore exposure to Ruchi Soya slipped, and Monnet Ispat’s strategic debt restructuring failed (the bank has ₹310 crore exposure to this account).

A senior bank official said the banking sector has an exposure of about ₹45,000 crore to Videocon.

As at March-end 2017, gross NPAs as a percentage of gross advances worsened to 16.27 per cent from 9.98 per cent as at March-end 2016. Similarly, net NPAs (NNPAs) as a percentage of net advances deteriorated to 10.66 per cent (6.35 per cent).

While net interest income (the difference between interest earned and interest expended) was down 28 per cent year-on-year (y-o-y) to ₹450 crore, non-interest income jumped 46 per cent to ₹315 crore.

Given that the bank has breached risk threshold 1 on ROA two consecutive years of negative ROA of 0.75 in FY16 and 0.67 in FY17 — and risk threshold 2 on NNPAs — of greater than or equal to 9 per cent but less than 12 per cent, the RBI is likely to invoke PCA against the bank.

The Dena Bank chief said under the PCA, there may be some restrictions on branch expansion. Outlining his plan to get the bank out of PCA, Kumar said the focus will be to give more loans to segments such as retail where there is less risk weight and provisioning and bring down the GNPAs.

Further, by stepping up thrust on loans to retail, agriculture and micro, small and medium enterprises, the bank will shrink the corporate loan book in the overall loan portfolio by about two percentage points in FY18.

Ramesh Singh, Executive Director, said as part of the bank’s revival strategy, it will merge branches, sell more third-party (insurance) products and undertake cost-cutting measures.

Meanwhile, the board of directors of the bank approved raising common equity tier 1 (CET1) capital up to ₹1,800 crore in one or more tranches by diluting government holding up to 52 per cent at an appropriate time.

Dena Bank shares closed at ₹44.60 apiece, down 5.61 per cent from the previous close on the BSE.

Published on May 09, 2017
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