HDFC Bank, ICICI Bank, to YES Bank, higher provisioning eats into 16 private banks’ Q3 profit

The aggregate net profit of 16 private sector lenders for the December quarter fell 8.7% year-on-year (y-o-y) to R9,605.4 crore owing to higher provisions for non-performing assets, Capitaline data showed. According to the data, provisions of private banks in Q3 rose 71% y-o-y to R9,474 crore.

For instance, Axis Bank reported a 73% y-o-y fall in its December quarter net profit to R579.57 crore as its provisions rose more than five times over the same period last year. The bank’s gross non-performing assets (NPAs) for the quarter jumped 105 basis points (bps) sequentially to 5.22% of total advances. The bank’s watch list reduced 20% over the previous quarter and stood at R11,091 crore, leading to a rise in bad loans.

Jairam Sridharan, chief financial officer, Axis Bank, said the increase of slippages from outside the watch list comes from three areas – corporate, retail and SME. “In retail and SME, there have been a mild increase over Q2 in slippages and some of that is driven by cash and liquidity issues and some are seasonal. But the big increase that you see in non-watch list slippages in the corporate side has essentially come from the iron & steel and infrastructure construction sectors mostly those that had originated prior to FY11,” he explained.

HDFC Bank’s 15.1% y-o-y growth in net profit to R3,865 crore in Q3FY17 was its lowest quarterly net profit growth in the last 14 years. Its provisions rose 9% y-o-y to R716 crore in the December quarter. Paresh Sukthankar, deputy managing director, HDFC Bank, said he was unable to give more visibility than the fact that its gross NPAs even in the last few quarters ranged between 1% and 1.2% as a percentage of the book.

“I think in an environment where we have seen perhaps roughly a doubling of the percentage of NPLs, much as we would like to, it will be difficult for us to predict the second decimal or where we would be,” Sukthankar said.

ICICI Bank reported a 19% y-o-y drop in its net profit at R2,441.82 crore. The bank’s net interest income (NII) – difference between interest earned and interest expended – witnessed a 1.6% y-o-y fall to R5,363 crore in the December quarter.

Chanda Kochhar, managing director & CEO of ICICI Bank, said of bad loan additions in the corporate and SME portfolio, 75% is either from the drill-down list, existing NPAs where the non-fund-based facilities would have devolved or from the restructured book. The bank reported lower provisions both on a y-o-y basis and sequentially in the December quarter. ICICI Bank also reported 109-bps sequential rise in gross non-performing loans in Q3.

A report by Jefferies said overall activity levels in sectors such as MSME, trading, real estate and 2/3-wheeler were still not back to normal levels. “Management commentaries suggest that return to normalcy will take a couple of months which will continue to be a headwind to loan growth and asset quality in coming quarters,” it said.

On the other hand, Kotak Mahindra Bank reported a standalone net profit of R880 crore in Q3, up 38% y-o-y. The bank posted a standalone gross NPA of 2.42%, a drop of 7 bps sequentially.