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Ravi Krishnan
Post ed: Mon, Jul 30 2012. 6:11 PM IST
Asset quality problems
continue for PSU banks
State-owned banks have flattered to deceive
after their March quarter earnings
pronouncements much like the majority of
Indian sporting teams
Print
State-owned banks have flattered to deceive after their March quarter
earnings pronouncements much like the majority of Indian sporting teams.
At that time, they were quick to declare that the worst is over, in terms of
deteriorating asset quality. But the June quarter earnings paint quite a
different picture.
Of the eighteen public sector banks which have so far declared their
earnings, 13 have reported an increase in stressed assets. For these
lenders, gross non-performing assets as a proportion of their total lending
has increased sequentially from the March quarter. Some bigger state-owned
lenders saw the sharpest rise.
For instance, Bank of Baroda
saw its gross NPAs rise 31
basis points during the quarter
to 1.85% of its loan book.
Similarly, Punjab National Bank
saw a 41 bps rise in its bad
loans level to 3.34%. While it
may come as somewhat of a
surprise, when one measures it
against the optimism exuded
by bank managements, what
else could one expect in a
sluggish economy?
But except for a slight expansion shown by the Purchasing Managers
Indices, other economic indicators or even corporate earnings show no
cause for such optimism. One point to note here is that state-owned banks
lend to a broader spectrum of customers; for instance they have a bigger
share in priority sector loans. In Canara Banks case, for example, 70% of its
slippages in the June quarter came from this segment.
That, however, is just one half of story. There is not much respite in the
amount of recast loans in the June quarter. Sure, some of the bigger banks
have shown a decrease in restructured loans they added in June. Bank of
Baroda recast only Rs 770 crore in June compared to Rs 5,281 crore the
previous quarter. Similarly PNB restructured loans worth Rs 1,240 crore in
June compared to Rs 8500 crore in March. But for every BoB and PNB, there
is a Corporation Bank or Allahabad Bank. The former, for instance, almost
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doubled its restructured portfolio in the last three months to Rs 14,000
crore.
Yes, a significant portion of these recast loans were those given to state
electricity boards and airlines. Some brokerages take that as an indication
that there might not be much additions to recast loans in the coming
quarters. But increasingly other sectors as varied as ports and sugar are
coming under stress, as can be seen from the June quarter earnings. If the
rains fail further, a portion of crop loans too might need to be restructured,
adding to continued pressures on public sector banks.
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