Despite improvement in asset quality and a massive rise in the treasury income, state-owned Bank of Baroda on Monday reported 48 per cent plunge in net profit at Rs 598.36 crore for the quarter ended March 31 as its tax and other statutory provisions soared.
This is in line with public sector lenders witnessing a steep decline in their net profits. Public sector lender Punjab National Bank (PNB) also saw its net profits halve in Q4FY15, mainly due to an increase in provisions towards bad loans.
These are the first two large PSBs to report quarterly results and, while it would be premature to make conclusions, they might give a sense of how their peers would have performed during the period.
Bank of Baroda’s bad loan provisions stood at Rs 1,491 crore in Q4FY15, a whopping 134 per cent increase year-on-year. Gross NPAs were up 76 bps at 3.72 per cent in the March quarter.
The banks’ MD & CEO, Ranjan Dhawan, said on Monday that it was difficult to give an NPA outlook for FY16. “Some major corporates are in great difficulty. There was already a debate on whether a major corporate should be classified as an NPA or not. Hopefully, it will not happen in the next 1-2 quarters. But if that happens, we will be hit by several hundred crores from a single company,” he said.
On other hand, PNB added Rs 15,692 crore of fresh loans to the non-performing asset (NPA) category in the March quarter. This compares with Rs 9,865 crore of slippages in Q4FY14, an 59 per cent rise y-o-y. Provisions towards bad loans were up 87 per cent y-o-y to Rs 3,281 crore in Q4FY15 and profit in Q4FY15 was down 62 per cent y-o-y to Rs 307 crore.
The bank’s management told analysts that they expect slippages to narrow. Gauri Shankar, executive director, Punjab National Bank, said: “We have been saying there will be no further slippages, but there have been.”
He added that banks from both the public and private sectors were facing problems due to a weak economy. On sectors that contributed to higher restructuring and NPAs in Q4, Shankar said: “These sectors are infrastructure, power, road, ports and steel.” FE