The new corporate debt recast (CDR) norms issued by the Reserve Bank last week will have a massive impact on the profitability of public sector banks to the tune of 18 per cent,says a report by Standard Chartered Securities.
However,the report says,the impact on private sector banks will be minimal,up to 2 per cent in profit terms.
If the new CDR guidelines are followed,net profit of state-run banks will likely decline by 6 to 18 per cent. But for private banks,it will be much lower at 0.2 to 2 per cent, the report by Mahrukh Adajania & Rounak Agarwal said today.
It noted that new provisioning norms for CDR loans are still substantially lower than the existing NPL provisioning.
State-run banks together had a CDR book of Rs 1,17,100 crore as of FY12,according to the report. In FY12 alone,they added Rs 62,800 crore in restructured assets.
The new provisions,under which banks will have to provide additional 3 per cent in the first year and 5 per cent in the second year,will see this increasing by Rs 3,500 crore.
SBI will have to make Rs 930 crore additional provisioning at 3 per cent incremental coverage,which will bring down EPS growth (FY12) to 34 per cent from 42 per cent.
As of March 12,SBI had a restructured loan book of Rs 31,160 crore with the FY12 CDR book totalling Rs 8,400 crore.
The second biggest victim will be Punjab National Bank,whose provisioning will rise by Rs 690 crore,but its EPS impact will be minus 1 per cent,from 10 per cent. The Delhi-based lender had a CDR loan book of Rs 23,060 crore as of FY12,it added Rs 1,481 crore in FY12 alone.
The worst impact on EPS will be at Oriental Bank of Commerce,which will see EPS erosion at 46 per cent (minus) post-implementation,from existing minus 35 per cent,the report said.
The second biggest impact on EPS will be at Canara Bank which will witness erosion to minus 28 per cent,which currently is also down at minus 24 per cent,says the report,adding its provisions will rise Rs 240 crore.
Bank of Baroda,the third largest PSB,will see its EPS coming to 2 per cent (from 10 per cent) and its provision will rise Rs 510 crore. In FY12 its CDR stood at Rs 885 crore and the cumulative restructured book at Rs 17,140 crore.
The city-based Bank of India will see its EPS eroding at minus 8 per cent from the current 3 per cent (positive),and will also see its provisions rise by Rs 430 crore. In FY12 it added Rs 913 crore in CDR loans taking its overall CDR book to Rs 14,370 crore.
Another city-based lender,Union Bank,will see its EPS plunging to (minus) 22 per cent from (minus) 14 per cent now,and CDR book will rise to Rs 240 crore. In FY12,it added Rs 623 crore in fresh CDR taking CDR outstanding to Rs 799 crore.
Among the private sector lenders,ICICI Bank will add Rs 130 crore in CDR under the new provision,and see its EPS whittling down to 22 per cent from 24 per cent. As of FY12,the largest private sector lender added Rs 374 crore in CDR,taking its restructured asset book to Rs 426 crore.
Axis Bank will have to set aside Rs 110 crore in provisions,pulling down its EPS to 22 per cent from Rs 24 per cent. It added Rs 133 crore in CDR last fiscal with the cumulative recast loan touching Rs 383 crore.
HDFC Bank will have minimal impact on provision,which will rise to Rs 20 crore and will not have any impact on EPS which will continue at 30 per cent. Its total CDR book stood at Rs 78 crore.
The Reserve Bank last week issued new CDR guidelines following the recommendations of its working group seeking tighter loan recast norms,which include higher contribution from promoters to ensure their full commitment,personal guarantee from the promoter which cannot be replaced with a corporate guarantee,higher provisioning by banks on restructured loans,reducing viability tenors and changes to the recompense clause.
The new guidelines proposes 5 per cent provision on restructured loans up from the current 2-5 per cent in a phased manner over two years.