Bad loans of private banks balloon 62.5% in Q4
PRIYA KANSARA
RBI-mandated
review reveals ICICI, Axis have most NPAs; outlook for others better
Mumbai, April 29:
With
the RBI tightening provisioning norms, the bad debt problem is knocking at the
doors of private sector banks too. Cumulative gross non-performing assets
(NPAs) of leading private sector banks, including ICICI Bank, Axis Bank, HDFC
Bank, IndusInd Bank and YES Bank, have surged 62.5 per cent to Rs. 38,227.14 crore in the fourth quarter of 2016
compared to Rs. 23,519.89
crore in same quarter last year.
The
NPAs have grown 18 per cent sequentially from Rs. 32,368.14
crore in the third quarter, ended December 2015. The rise has been due to the
asset quality review (AQR) process ordered by the Reserve Bank of India.
As part
of the AQR exercise, the RBI had asked banks to review certain loan accounts
and their classification over the third and fourth quarter of FY16.
Standing
on the edge?
ICICI
Bank and Axis Bank accounted for 85 per cent share of the total gross NPAs of
private banks as at the end of March 2016. ICICI Bank on its own accounted for
68.6 per cent of the total NPAs.
The
largest private sector bank’s gross NPAs in terms of percentage to gross
advances has jumped 202 basis points year-on-year and 108 basis points
sequentially, to 5.8 per cent.
A mixed
bag
Gross
NPAs as a percentage of advances for other banks vary. HDFC Bank has remained
stable over the last four quarters; others have seen a rise of 8-30 basis
points in the fourth quarter of FY16 compared with the first.
Analysts
expect the worst is over for private banks on the NPA front — except for ICICI
Bank and Axis Bank as the two have sizeable share of corporate loans (27.5-46
per cent) in the total portfolio compared to others. “ICICI Bank and Axis bank
will continue to witness the NPA pain. While Axis Bank has guided that it will
take two years for the mess to be cleared, we expect the same to take at least
six quarters for ICICI Bank. These negatives are not yet factored in fully into
the stocks,” said Abhineesh Vijayraj, analyst at Spark Capital.
‘Skies
will clear’
Harendra
Kumar, Managing Director-Head (Institutional Equities & Global Research),
Elara Capital, is positive on private bank stocks as the outlook turns positive
post the clean-up on account of AQR.
The
combined market capitalisation of HDFC Bank, IndusInd Bank and YES Bank has
gone up by 7 per cent since January compared to the 1 per cent gain in the
Nifty Private Bank index. Market capitalisation of HDFC Bank is more than
combined market capitalisation of ICICI Bank and Axis Bank. ICICI Bank is the
exception as it has underperformed Nifty Private Bank index in the last four
months with a decline of 9.5 per cent since January.
Courtesy Business Line
