Twenty-one listed state-owned banks together set aside 1.5 times more as provisions than the aggregate operating profit they made during the quarter ended September, as provisions against mark-to-market losses on their bond portfolios added to pressure from loan losses.
Data from Capitaline showed that while the public-sector lenders made provisions to the tune of Rs 57,746 crore, their aggregate operating profit stood at Rs 36,758 crore. This marks a 7.6 per cent year-on-year (y-o-y) jump in provisions. Operating profit for the public-sector pack actually fell 24 per cent y-o-y as state-owned lenders continue to be plagued by a high share of non-performing assets (NPAs), which do not yield interest.
In the September quarter of FY19, the same set of public-sector banks (PSBs) had notched up a provisioning burden worth 1.4 times their operating profit.
A clutch of 17 listed private banks also put in an equally bad show on this front, with provisions rising 7.7 per cent y-o-y to Rs 12,850 crore. However, operating profit at private banks grew 4.7 per cent y-o-y to Rs 29,200 crore.
Among the 38 banks, the steepest climb in provisions came at Punjab National Bank (PNB), which saw the figure jump 300 per cent y-o-y to Rs 9,758 crore. PNB said it set aside Rs 3,295.12 crore during the September quarter against its exposure to the Nirav Modi and Mehul Choksi-related accounts. The bank also charged depreciation of Rs 725 crore for Q3 and Q4 of FY18 as well as Q1 of FY19 and provided Rs 529 crore against MTM losses during Q2FY19.
Analysts say PNB is unlikely to spring any fresh negative surprises in the quarters ahead. In a post-results note, Kotak Institutional Equities (KIE) wrote, “On the fraud in the gems and jewellery sector, the bank has made a provision of 85 per cent and it is likely to complete this in the next quarter. Overall, the asset quality should show further improvement, considering that the NCLT (National Company Law Tribunal) cases would see higher resolution in H2FY19.”
PNB was followed by Syndicate Bank, which saw provisions surge 149 per cent on a y-o-y basis.
Among private banks, Yes Bank saw the sharpest jump in provisions, which stood at Rs 940 crore for Q2, up 110 per cent y-o-y. Rajat Monga, senior group president – financial markets and chief financial officer, Yes Bank, said credit costs for the first half of FY19 are in line with the bank’s guidance. “We had given a 50-70 basis-point (bps) guidance for the year and we are currently at 33 bps for the full year,” he observed.
IDBI Bank saw provisions surge 102 per cent y-o-y to Rs 6,580 crore.