More banks hawk loans gone sour-Business Standard
Oriental, Dena Bank put stressed assets worth Rs 1,200 cr on block, as part of a rising trend; expected to gain momentum in the coming year
Oriental Bank of Commerce and Dena Bank plan to sell 78 non-performing loans between them, to contain pressure on their balance sheets.
The prolonged economic slowdown, stretched working capital cycles and higher interest rates have pushed many companies across sizes to the brink of default. The extent of rise in non-performing assets (NPAs) has been unprecedented.
According to Reserve Bank of India (RBI) data, gross NPAs of commercial banks ballooned from Rs 94,121 crore (2.36 per cent) in March 2011 to Rs 236,245 crore (4.2 per cent) by end-September 2013.
There are growing signs of banks becoming ready to sell some of the bad loans in their portfolios, to keep on holding these in the hope of realising value. The pace of growth in cash flows has been tepid and banks’ holding power on NPAs is going down in the present business environment.
Dena Bank, the Mumbai-based public sector lender, plans to offload loans to 51 accounts, with dues of Rs 596 crore. Its gross NPAs are Rs 1,968 crore (three per cent of the total). Gurgaon-based OBC will sell NPAs of 27 accounts, having principal dues of Rs 640 crore. Its gross NPAs were Rs 4,887 crore (3.8 per cent) at end-September, according to Capitaline data.
Both banks have indicated that NPAs could be sold on a cash basis or issuance of securities’ receipts or a combination.
Public sector bank executives said lenders might prefer to get security receipts (for sale) in cases where a unit is viable and has potential for revival, seeing an advantage in staying invested.
Chintan Shah, assistant vice-president with Special Situation Advisors Pvt Ltd, said in the current financial year, 16 banks had put bad loans worth Rs 7,000 crore on the block for interested buyers. During the fourth quarter (January-March 2014) more would be in the market to do so.
State Bank of India, the country’s largest lender, is sticking to a target of selling NPAs worth Rs 3,000-4,000 crore in 2013-14. However, the proposed more liberal regime for asset buys and sales should see more activity in 2014-15.
“Banks look for best possible value, while buyers such as asset reconstruction companies would like to buy at a low price. The net outcome of these dynamics are very few successful deals,” says an analyst with a broking house.
This picture could change in 2014. RBI has proposed a framework of incentives for prompt decisions on restructuring or sales, so that assets do not become a problem. There will be penalties like accelerated provisioning for dragging one’s feet in deciding the fate of such accounts.
Govt ups stake in Corporation Bank-Business Line
MANGALORE, DEC. 20:
The Central Government has increased its stake in Corporation Bank to 63.33 per cent.
The bank informed BSE on Friday that the Securities Allotment Committee of the board of the bank at its meeting on December 20 has allotted 1,46,27,486 equity shares of Rs 10 each at a premium of Rs 297.64 a share to Government of India on a preferential basis.
With this, the bank’s issued and subscribed capital has expanded to 16,75,41,877 equity shares, and Government’s holding in the lender moved up from 59.82 per cent to 63.33 per cent.
The allotment was made following the consent given by the bank’s shareholders at its extraordinary general meeting on December 16, the bank said.
Rising non-performing assets a concern, says Andhra Bank CMD-The Hindu
Non-performing assets (NPA) will continue to impact the performance of Andhra Bank in the third quarter, C. V. R. Rajendran, who took over as the Chairman and Managing Director of the bank recently, said here on Thursday.Speaking to The Hindu over phone, he said, “The NPAs will continue to impact the third quarter. There are some more slippages left on the NPA front in the current quarter.
We do not know about the fourth quarter though.” Going by the broad indications of the Reserve Bank of India, the bank was not keen on lending to commercial real estate, he added.
“Owing to the global trends and the instructions of the RBI, the lending to activities in capital markets and commercial realty are always unwanted and least priority,” he said. The real estate sector is one of the major areas where the bank has taken a hit.
The Rs.200-crore plus account of Deccan Chronicle Holdings Ltd (DCHL) is one of the major accounts in the NPA arena.
The loan has 110 per cent mortgage back up, but the issue of multiple mortgages by DCHL is a concern for the bank. The bank is expected to auction the properties of DCHL shortly.
At present, the dipping profits and the growing NPAs are the key concerns before the new CMD.
The net profit of the bank in the second quarter by the end of September 30, 2013, was down by 78 per cent to Rs.71 crore from Rs.326 crore last year.
Net NPAs of the bank were up from 2.16 per cent last year to 3.54 per cent this year.
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