Says 'adequate' provisions made against these loans
Axis Bank, the third largest private sector lender in the country, today said it has classified its loans to Deccan Chronicle Holdings as non-performing assets (NPAs).
"We have made provisions proactively. We have declared (the loans to) Deccan Chronicle as NPA. We provided adequately against this exposure," Somnath Sengupta, executive director at Axis Bank, told reporters.
He declined to offer further details. "I cannot comment on specific accounts and discuss details in public," Sengupta said.
It is believed the private lender has lent close to Rs 400 crore to the company, which owns Deccan Chronicle newspaper and the Indian Premier League (IPL) cricket team Deccan Chargers. The Hyderabad-based company has borrowed around over Rs 3,200 crore loans from banks and financial institutions.
The bank's total provision during July-September period almost doubled from a quarter ago to Rs 509.4 core. Sengupta said the bank has made Rs 115 crore excess NPA provisions than it was required to because of the current uncertain economic environment.
Axis Bank held a provision coverage ratio of 80 per cent as proportion to its gross bad assets including prudential write-offs at the end of September, 2012. The provision coverage ratio before accumulated write-offs was estimated at 90 per cent.
The private lender closed the quarter with a restructured loan portfolio of Rs 4,068 crore, representing 2.04 per cent of gross customer assets. "There is no particular trend. We continue to maintain our guidance (on restructured loans) at Rs 4,000 crore," Sengupta said.
"While the gross and net NPAs at Rs 2,200 crore and Rs 650 crore, respectively were lower than consensus estimates, the overall provision expenses have dramatically shot up. With restructuring during the second quarter at Rs 320 crore, the slippage number may have remained high," Kashyap Jhaveri, analyst with brokerage Emkay Global Financial Services, said in his note to clients after the bank announced its second quarter earnings yesterday.
The brokerage noted that the proportion of the borrowers among the large and medium corporate with A and above rating has gone down in July-September period to 62 per cent. "Over last four quarters, Axis Bank has seen migration of up to 11 per cent of loans from A and above rated category to lower categories," Jhaveri said.
Monday, post market-hours Axis Bank had said its second quarter net profit increased by 22 per cent to Rs 1,124 crore aided by higher interest and fee income, and lower expenses.
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