Krishna Pophale / Mumbai Nov 14, 2012, 17:11 ISTAmid rise in non-performing assets, most public sector banks have seen substantial drop in their provision coverage ratio in the last one year – since the time Reserve Bank of India withdrawn the 70 per cent provision coverage ratio norm. Private sector banks, on the other hand, where the pressure on asset quality was far less, maintained a healthy provision for their bad assets.
Provision coverage ratio refers to the ratio of outstanding provision to gross NPAs and higher provisioning deplete the bottomline of banks.
“With a few exceptions, majority of government banks have reported a sequential decline in their provision coverage ratio, while private sector banks have fared better. This has been one of the areas of concern regarding public sector banks, in our view,” said Saday Sinha, vice president, Equity Research, Kotak Securities.
Most PSBs have reported PCR less than 70 per cent during the second quarter this year. Earlier, Reserve Bank of India (RBI) had mandated banks to have a minimum 70 per cent PCR but withdrew the norm in September 2011 as asset quality pressure on banks started taking a toll of their profitability.
According to bankers, the pressure on bad assets were far more acute for public sector banks which has resulted in lower overall provisioning. According to RBI data, gross NPA for public sector banks increased to 3.3 per cent as on end March 2012, from 2.4 per cent a year ago, while for private lenders, the ratio has actually declined to 2.1 per cent from 2.5 per cent during the same period.
State Bank of India, the country’s largest lender, reported lower provision coverage ratio for the second straight quarter which stood at was 62.78 per cent as compared to 68.10 per cent as on March end. SBI had reported 30 per cent profit growth in the second quarter. According to RBI data, provision coverage ratio for public sector stood at 47.6 per cent as on end March 2012 as compared to 49 per cent a year ago, while for private sector lenders it was 74.9 per cent as compared to 74 per cent during the same period.
Private banks are consistently maintaining PCR of above 70 per cent even if there is no regulatory compulsion on the banks to maintain PCR. For instance largest private lender ICICI Bank had PCR of 78.7 per cent at the end of September quarter while second largest HDFC Bank had PCR of 82 per cent.
Both banks have reported a healthy profit growth with ICICI Banks net profit rising 30 per cent to Rs 1,956 crore while HDFC Bank’s net also rose 30 per cent to Rs 1,560 crore.
HDFC Banks gross NPA was also reported at 0.91 per cent which was lesser year on year by six basis points when PSBs reported rise in gross as well as net NPAs while ICICI Banks net NPA was 0.66 per cent in September quarter.
Dhananjay Sinha, Emkay Global Financial Services said “the the asset quality and yield on assets is far better for the private banks compared to PSBs and also their capital adequacy ratio which is better that PSBs enables them to provide more towards bad assets while maintaining the net profit growth.”
http://www.business-standard.com/india/news/loan-loss-cover-for-govt-banks-dip-amid-rising-npa/195832/on
| Govt banks line up 2,000 cr bad loan sale |
| At least three banks have started talks with asset reconstruction firms for sale of bad assets |
Neelasri Barman / Mumbai Nov 14, 2012, 18:08 IST
The market for bad loans is gaining momentum with public sector banks lining up at least Rs 2,000 crore of sale of non-performing asset during the current financial year. According to bankers at least three banks have started negotiation with asset reconstruction companies for the sale of bad assets.
According to bankers, Mumbai-based Central Bank of India is likely to put Rs 540 crore of stressed asset on the block while another Mumbai-based lender IDBI Bank is in discussion to sale Rs 200 worth of NPA. Kolkata-based UCO Bank is also negotiating with asset reconstruction firms to sale Rs 380 crore of bad loans.
Bankers pointed out they will prefer all cash deals rather than security receipts for the sale of their bad assets, as cash receipts directly help their profitability while security receipts needs to be marked-to-market. Most of the NPAs that are considered for sale are mid corporate accounts.
All cash deals of stressed asset deals had dried up in the last few years following introduction of stricter norms by Reserve Bank of India. According to the norms, banks while selling non-performing assets have to work out the net present value of the estimated cash flow associated with the realisable value of the available securities net of the cost of realisation. The sale price, generally, should not be lower than the net present value.
Bankers also pointed out since asset reconstruction companies were not keen for all cash deal, that has also resulted in fewer transaction in this segment. According to RBI data, as on end June security receipts issued by securitization and reconstruction companies were at Rs 16,700 crore, higher by Rs 200 crore than in end March. As at end-June 2012, banks subscribed to almost 70 per cent of total security receipts issued by 14 securitisation/reconstruction companies.
In recent times, one of the biggest deals of bad loans took place when Barclays sold its non-performing credit card portfolio to Kotak Mahindra Bank.
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http://www.business-standard.com/india/news/govt-banks-line2000-cr-bad-loan-sale/195844/on
FM to discuss rates, rising NPAs at meeting with PSBs
Rising non-performing assets (NPA) and deterioration in asset quality along with a need to encourage lending to productive sectors are expected to be the main focus of talks when finance minister P Chidambaram meets heads of public sector banks (PSBs) on Thursday.
The meeting comes soon after the half-yearly review of monetary policy by the Reserve Bank of India (RBI) wherein the central bank left benchmark interest rates unchanged on concern of inflation. To help revive growth, Chidambaram is also scheduled to meet chief ministers of the northern states including Uttar Pradesh, Uttarakhand, Haryana, Punjab and Jammu and Kashmir on Friday. Over the next few weeks, he will hold similar discussions with chief ministers of other states to understand regional issues on financial inclusion and credit flow.
NPAs of state-owned lenders have been on the rise for the past two quarters due to slowdown in economy as well as poor rains. The gross NPAs of some public sector banks, including State Bank of India (SBI), Punjab National Bank (PNB) and Central Bank of India, have crossed 4 per cent of total assets at the end of September, 2012.
While SBI reported gross slippages of Rs 7,111 crore in the second quarter, PNB provisioned Rs 11,140 crore towards NPAs in the same period. Sources said that the meeting, which would be Chidambaram’s second such review after taking charge of the finance ministry, would also discuss, the first half performance numbers, deteriorating asset quality and credit growth.
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