MUMBAI:ICICI Bank and Bank of Baroda on Friday reported sharp rise in provisions with non-performing loans persisting at elevated levels, which underscored the ground reality of sedate economic recovery despite buoyant business sentiment.
Investors showed thumbs down to bank stocks on the Bombay Stock Exchange (BSE). ICICI Bank closed 5 per cent lower at Rs 361.15 and Bank of Baroda plunged 11.1 per cent to Rs 193.35. State Bank of India fell 5.13 per cent Canara Bank 5.56 per cent, Bank of India 4.9 per cent and Punjab National Bank 4.7 per cent and in the process Bankex fell 3.1 per cent.
The benchmark BSE Sensex, while hitting new high of 29,844.16 points, but succumbed to heavy profit-booking led by banking shares to fall by 498.82 points to 29,182.95.
ICICI Bank said its gross NPAs rose to 3.40 per cent of total advances for the quarter ended Dec 31, 2014, and provisions of Rs 980 crore. This compares with 3.05 per cent gross NPAs in the year-ago period and provisions of Rs 695 crore.
Provisions relating to NPAs and restructured assets are due to the uneven recovery and slippages in restructured assets, managing director and chief executive Chanda Kochhar said in a media conference call. Kochhar expects NPAs and slippages for the current financial year to be at similar level as the previous year. Net non-performing assets stood at Rs 4,831 crore as of Dec 31, 2014 compared with Rs 3,121 crore a year earlier.
“We should expect recovery in two to three quarters from now,” said Kochhar adding “Any positive impact on banking comes with a lag.’’
ICICI Bank reported 14 per cent higher net profit to Rs 3,265 crore during the quarter compared with Rs 2,872 crore in the year-ago period.
Loans grew by 16 per cent, higher than the industry level of 10-11 per cent. Lending to retail borrowers rose by 25 per cent, compared with just 4 per cent to domestic corporate borrowers.
Retail loans, including housing and auto loans, constitute 41 per cent of ICICI’s total loans compared with 29 per cent to domestic corporates and 25 per cent to overseas borrowers.
Bank of Baroda reported 68 per cent drop in its net profit for the third quarter to Rs 334 crore as it doubled its tax provisions and increased by 66 per cent provisions for non-performing assets. Shares plunged 11.1 per cent and breached its lower circuit.
It provided Rs 1,262 crore for NPAs, and set aside Rs 743 crore for tax provisions, because of Rs 374.9 crore tax paid by the bank to UAE for liability of earlier years.
“Both gross NPA at 3.85 per cent and net NPA at 2.11 per cent reflect continued stress in economic environment and the ongoing structural issues,’’ the bank’s executive director Ranjan Dhawan said.
“Profit after tax was lower than expected on the back of higher provisions as fresh impairment rose 60 per cent over the previous quarter to Rs 4,640 crore in the third quarter,” said Saday Sinha, banking analyst at Kotak Securities.