Money & Banking

Q1 results of stressed-out private lenders likely to remain muted

Surabhi | | Updated on: Jul 09, 2018
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May pick up after a few quarters, say analysts

 

 

Most banks are likely to post muted results for the first quarter of the fiscal as the turnaround in their balance sheet and improvement in lending capacity could be some time away.

Private sector banks, starting with IndusInd Bank, will begin to report their results for the quarter ended June 30 from Tuesday.

The first quarter results of larger private sector lenders, including HDFC Bank, ICICI Bank and Kotak Mahindra Bank, will be declared in the later half of the month. But barring a few like HDFC Bank, which on Monday said it has registered a 22 per cent increase in advances in the first quarter and a 20 per cent jump in deposit growth, most lenders are likely to register some impact from the higher provisioning norms and the February 12 circular of the Reserve Bank of India (RBI).

“We don’t expect much improvement in the first quarter. Public sector banks have registered high losses, and there has been a lot of impact on private banks due to the February 12 guidelines by the RBI. The impact is likely to continue for one or two more quarters. But some cases have been resolved under the NCLT and the NPA levels could see a marginal reduction,” said Aditya Acharekar, Associate Director, CARE Ratings.

Focus on low-risk sectors

A private banker, who agreed with Acharekar, said that most lenders want to focus on low-risk sectors such as retail as they try to recoup their losses and are no longer in the mood to go in for project lending.

“Recognition of non-performing assets (NPAs) has taken place with the RBI’s recent directions. It is good as it has brought out the problem in the open, but the banking system is yet to revert to normal. A lot of money is still stuck in cases under insolvency,” he said.

According to a recent report by rating agency Crisil, about ₹5 lakh crore of bank loans deteriorated into NPAs in 2017-18. It estimated that gross NPAs increased to about ₹10.3 lakh crore, or 11.2 per cent of advances, as on March 31, 2018, compared with ₹8 slakh crore, or 9.5 per cent of advances, as on March 31, 2017.

ICRA said in a recent report that credit provisions for private banks are likely to be lower at ₹22,500 crore to ₹33,300 crore in 2018-19 against ₹50,300 crore last fiscal.

“With steady growth of 15 to 17 per cent in advances for private banks this fiscal and expected decline in credit provisions, the profitability and return on equity are expected to improve,” it had said.

In the fourth quarter of 2017-18, higher provisions for bad loans had impacted the profits of not only most public sector banks but also private lenders.

ICICI Bank had posted a 49.6 per cent decline in standalone profits for the quarter ended March 31, 2018, at ₹1,020 crore. Similarly, Axis Bank had reported a 78.6 per cent fall in net profit for the fourth quarter of 2017-18, with a net loss of ₹2,188.74 crore and a three-fold increase in provisioning.

Others such as Kotak Mahindra Bank and YES Bank had registered higher provisioning, but had still posted robust growth in their net profit for the quarter ended March 31, 2018.

Published on July 09, 2018

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