SBI, ICICI see loan provisioning spike

The country's top two banks reported a sharp rise in loan loss provisioning in the second quarter of 2006-07. The provisioning for net non-performing assets (NPAs) rose nearly 11 times for State Bank of India (SBI) and by over 3 times for ICICI Bank, on slippage in loan accounts, particularly retail.

SBI's provisioning for NPAs was Rs 116 crore in July-September 2006 against Rs 10.7 crore a year earlier, an increase of 981.1 per cent. For ICICI Bank, the provisioning was Rs 380 crore in the second quarter of 2006-07 against Rs 90 crore a year earlier.

"Loan loss provisioning (for ICICI Bank) as a percentage of assets was high at 0.98 per cent," said securities firm Edelweiss Securities in a report.

In the case of ICICI Bank, provisioning requirement went up owing to higher general and specific provisions on loans. Overall provisions during the quarter were 133 per cent higher year-on-year and 47 per cent quarter on quarter for for ICICI Bank.

Though gross NPA levels for the bank have increased sequentially, they were down year-on-year. Its net NPA ratio rose to 0.9 per cent in September 2006 from 0.8 per cent in June 2006. Gross NPA ratio also went up to 2.3 per cent in September 2006 from 2.16 per cent in June 2006.

"With change in mix of assets towards high yielding-high risk businesses, we expect net NPA levels to remain around 1.0 per cent (for ICICI Bank), Edelweiss said.

SBI's gross NPA in absolute terms declined to Rs 10,300 crore at the end of September 2006 from Rs 12,500 crore at the end of September 2005 (Rs 10,390 crore in June 2006).

Its gross NPA as a percentage of advances as of Q2FY07 was at 3.57 per cent, a substantial improvement from 5.26 per cent as of September 2005. Its net NPA ratio improved to 1.67 per cent in September 2006 from 2.27 per cent in September 2005 (1.69 per cent in June 2006).

ICICI Bank registered 49 per cent growth in balance sheet size with advances growing 45 per cent year-on-year to Rs 1,60,000 crore, while deposits grew 57 per cent to Rs 1,90,000 crore.

Retail advances continued to be the growth driver on the asset side, growing by 57 per cent and constituting 69 per cent of total advances.

SBI's advances grew by 22 per cent and deposits by 11 per cent, lower than the system growth due to conscious management strategy of reducing low yielding large corporate loans and high cost bulk deposits.

Its retail advances grew by 26 per cent year-on-year and constituted 26 per cent of total credit as against 25 per cent in September 2005.