PSU banks bad loans may have peaked in Q4, but loan recasts up

British brokerage Barclays today said that the March quarter numbers of public sector banks would take a hit due to the high loan recasts.
However, the brokerage said the NPAs troubles have peaked during the reporting quarter for the state-run lenders.
"The underlying assets quality trends for public sector banks likely remained weak although net slippages remained below peak levels", Barclays said in its earnings preview report for the fourth quarter of FY14.
Barclays said had it not been for the high loan restructuring, the overall numbers would have been peaked in the just-ended quarter.
NPAs crossed past 5 percentage level in the December quarter for the state-run banks, while restructured loans crossed Rs 3.6 trillion, taking the overall stressed books to well over 10 per cent.

SBI's net slippages in Q4 would have been at 2 per cent against the peak of 4.2 per cent in Q1 FY14. Other state-run lenders Bank of Baroda, Bank of India and Punjab National Bank's net slippages would have been at 1.1 per cent, 0.6 per cent and 0.8 per cent, respectively, the report said.

Net profit for SBI in Q4 would have stood at Rs 2,820 crore, while for BoB it would be Rs 1,040 crore. The pre- provision profitability for the PSU lenders is likely to have bottomed in Q4, it said.
According to Barclays, pre-tax profitability growth for private sector banks in the March quarter would be 17 per cent, which is in line with their loan growth. "Axis Bank is the only notable exception with pre-tax growth likely to be weak due to muted fee growth."

Net slippages for private banks would have likely remained elevated in the January-March period. ICICI Bank's net slippage would have risen to 1.3 per cent, while for Axis Bank it would be 1 per cent.
Although private banks are likely to report operating income growth of 15 per cent on year in Q4, a notch below loan growth, this should have been offset by tighter cost controls which was at 12 per cent on year, the report said.
Under non-banking finance companies, the vehicle finance segment may have delivered a weak performance in terms of both pre-tax and credit costs in fourth quarter, it said.

Infra financiers' loan growth in Q4 is likely to have slowed further, whereas housing financiers may have maintained steady loan growth, the report added.