Asharp rise in provisioning for bad loans lowered the net profits of public sector banks in the second quarter of this financial year. Most banks saw an increase in non-performing assets (NPAs) on back of rising interest rates and migration to an automated recognition system.
Mumbai-based Bank of Baroda (BoB) posted an increase of 14.4 per cent in net profit at Rs 1,166 crore in the quarter ended September, provisioning for bad loans more than doubled to Rs 298 crore as compared to same quarter, last year. “Increase in NPAs was seen from all sectors and geographies,” said M D Mallya, chairman and managing director. He said Rs 663 crore worth of assets were restructured quarter and 10-11 per cent of the total restructured portfolio slipped into NPAs in July-September.
All government banks were mandated to shift to an automatic NPA recognition system by the end of September. Also, adding to the pressure on banks’ asset quality was the monetary tightening by Reserve Bank of India as it raised policy rates 13 times since March, 2010.
Higher provisioning dragged Bangalore-based Canara Bank’s net profit 15.4 per cent, to Rs 852.2 crore during the reporting period. The higher provisioning was because the bank has migrated all accounts to the automated NPA recognition system. “We have taken a hit on our net profit mainly because of higher provisions towards NPAs to the tune of Rs 553 crore, higher by 3.5 times over the corresponding quarter,” S Raman, chairman and managing director, said.
New Delhi-based Oriental Bank of Commerce which has seen provisioning for bad loans and writeoffs more than double to Rs 485 crore in July-September this year, reported 58 per cent decline in net profit to Rs 167 crore.
An increase in bad loans also weighed on Corporation Bank which reported 14 per cent rise in net profit at Rs 401.11 crore. The gross NPAs of the bank rose 1.32 per cent at end-September from 1.05 per cent in the same period of the previous year. According to the management, the major source of addition to bad loans were small and medium enterprises and the agriculture sector.
Led by a higher yield on advances and lower provisioning, Kolkata-based UCO Bank posted a 94 per cent rise in net profit to Rs 231 crore for the quarter ended September 30, against Rs 119 crore in the same period last year.
Dena Bank reported 20.8 per cent rise in net profit at Rs 193.58 crore for the quarter ended September 2011. Its net interest income was up 16.43 per cent at Rs 514.9 crore.
United Bank of India posted a 13.7 per cent rise in net profit to Rs 124.77 crore for the quarter ended September against Rs 109.7 crore in the same period last year. The bank’s slippages more than doubled at Rs 623 crore in the last quarter, against Rs 203 crore in the same period last year. “More than 50 per cent of the slippages are on account of mid-corporate accounts; the rest is contributed by small ticket advances,” said Bhaskar Sen, MD and chairman.
Vijaya Bank today cut its base rate by 0.25% to 10.20% with immediate effect.