Listed PSBs in red for a third quarter

Pace of additions to NPAs slower but provisioning pressure will continue for a while

With large amounts to be set aside as provision for bad loans, listed public sector banks (PSBs) as a group posted a net loss in the June quarter, third such in their loss- making run.

The net combined loss for the 25 listed PSBs was Rs 1,193 crore in the quarter, as against a net profit of Rs 9,449 crore in the same period of 2015.

Bank executives and analysts say credit growth was tepid from many quarters, affecting interest income. And, a surge in slippages, warranting huge provisions.

The only saving grace was healthy growth in non-interest income (39 per cent), mainly revenue from treasury operations that benefited from easing of the yield on bonds..

Sequentially, the PSBs trimmed their net loss, from Rs 23,493 crore in the March quarter, the final one of 2015-16. They had reported a loss of Rs 10,794 crore in the December quarter.

The provisions (predominantly for non- performing assets) and contingencies almost doubled to Rs 35,969 crore, from Rs 18,784 crore a year before. Sequentially, however, the burden of provisions came down from the Rs 71,344 crore in January-March.

A PSB executive said pressure on the balance sheet would continue over some more quarters, as the banks would have to set aside money for aging loans (those remaining as NPAs for a longer period).

The Reserve Bank had asked banks to recognise and make provision for weak assets under its Asset Quality Review in the third and fourth quarters of FY16, with the aim of cleaning their balance sheets fully by March 2017. This exercise has put pressure on bank books for the short term, though it should strengthen balance sheets to finance fresh credit in the long term.

The pool of gross NPAs has almost doubled in one year, to Rs 576,158 crore by end-June 2016, from Rs 288,743 crore. The pace of sequential additions to the bad loan kitty slowed, compared to gross NPAs of Rs 530,966 crore in end-March.

Net interest income (NII) dipped two per cent to Rs 47,783 crore in the June quarter, from Rs 48,745 crore a year before. In the March quarter, it was a combined Rs 47,745 crore. NII was impacted by reduction in lending rates and reversal of interest income for accounts that slipped into the NPA category, said State Bank of India head Arundhati Bhattacharya.

Non-interest income was up 39 per cent to Rs 23,039 crore, from Rs 16,572 crore in April-June 2015.