Asset quality concerns appear to be easing for private sector banks, with most of them reporting a reduction in gross non-performing assets (NPAs) in the fourth quarter, on the back of increased recovery.
The top three private banks in the country reported a reduction in gross NPA ratios sequentially as well as on a year-on-year basis in Q4.
ICICI Bank, the country’s largest private sector lender, reported a marginal improvement in gross NPA ratio of 2 bps from Q3, and 19 bps from the year-ago period, at 3.03%. The bank made recoveries worth Rs 400 crore during the quarter.
Chanda Kochhar, managing director & chief executive officer of ICICI Bank, recently said: “On asset quality, I think we are currently at the peak level of NPA addition. In FY15, additions to NPAs and restructured assets should be lower than FY14.”
ICICI Bank added Rs 2,156 crore of restructured loans during the quarter and has a recast pipeline of Rs 1,500 crore.
Similarly, HDFC Bank’s gross NPA levels at the end of Q4FY14 stood at 0.98% against 1.01% in Q3. The lender’s total restructured loans were 0.2% of gross advances, unchanged from the preceding quarter.
“Overall, the asset quality has been stable over the last few quarters. We have been through this cycle and gross NPAs are below our historical average. That incremental NPA formation has come down is evident from the numbers,” said Paresh Sukthankar, deputy managing director, HDFC Bank, recently.
Another private sector lender Axis Bank, however, expects a faster recovery in FY16 only. “In FY15, we expect our credit cost, which is an indication of asset quality pressures, to remain at the same level as this year. Hopefully, FY16 will be the year of recovery,” said Somnath Sengupta, executive director.
Axis Bank’s gross NPA levels were at 1.22% and the lender made recoveries worth Rs 149 crore in Q4. Slippages stood at Rs 301 crore, less than Rs 589 crore in the October-December period.
Kotak Mahindra Bank, on the other hand, said it had a writeback of Rs 34.94 crore on provisions towards advances, which came in mostly through recoveries from bad assets that its asset reconstruction company bought.
Uday Kotak, vice-chairman & managing director, said it has a pool of recoverable assets worth about Rs 2,000 crore and that the bank is looking at buying distressed assets. “Hopefully in FY15, if banks reprice their loans properly, we would love to buy distressed assets,” he added.
– fe Bureau | Financial Express