Mid sized banks report higher Q2 net profit as asset quality improves

Mumbai: A host of public sector banks that declared their second-quarter results on Friday reported higher profits on improved asset quality and operational metrics as fresh slippages were lower in the absence of lumpy corporate non-performing assets. Even while the bad loan formation was lower, all the banks shored up their provisioning buffers before the asset-quality onslaught began in the December quarter.

State-owned Indian Overseas Bank (IOB) reported a net profit of Rs 148 crore for the second quarter of the current fiscal as bad loans and provisions declined, compared to a net loss of Rs 2,254 crore in July-September quarter a year ago. Bank of India (BoI) reported over two-fold jump in the September quarter consolidated net profit at Rs 543.47 crore as bad assets came down, compared to a net profit of Rs 257.31 crore for the same quarter a year ago.

Union Bank of India reported a 55.3 per cent jump in its net profit at Rs 517 crore in the second quarter, compared to a net profit of Rs 333 crore in the same quarter a year ago. Similarly, Central Bank of India reported over 20 per cent rise in its net profit at Rs 161 crore for the second quarter ended September 30 compared to a net profit of Rs 134 crore in the corresponding quarter of the previous financial year.

There was a substantial improvement in IOB’s asset quality as the gross non-performing assets (NPAs) plunged to 13.04 per cent of the gross advances as of September 30, 2020 from 20 per cent at the end of September 2019. In value terms, gross NPAs or bad loans fell to Rs 17,659.63 crore as against Rs 28,673.95 crore a year ago. Total fresh slippages (other debits to existing NPA accounts) for September quarter were contained at Rs 292 crore, the lender said. Provisions for bad loans and contingencies fell to Rs 1,192.55 crore during the quarter under review from Rs 2,996.04 crore set aside in the year-ago quarter.

BoI’s gross non-performing assets (NPAs) fell to 13.79 per cent of gross advances as on September 30, 2020, from 16.31 per cent by the year-ago period. In value terms, gross NPAs or bad loans stood at Rs 56,231.76 crore as against Rs 61,475.60 crore earlier. However, provisions for bad loans increased to Rs 2,133.87 crore during the quarter from Rs 1,452.09 crore parked aside for the year-ago same quarter.

Central Bank of India’s also improved on its bad assets ratio with the gross non-performing assets (NPAs) falling to 17.36 per cent of gross advances by the end of September 2020, from 19.89 per cent by the end of September 2019. Provisions for bad loans and contingencies, however, rose to Rs 1,104.92 crore for the reported quarter of 2020-21, from Rs 791.33 crore in the year-ago period. The provision coverage ratio also improved to 82.24 per cent, against 76.68 per cent a year ago.