Private sector banks in sluggish mode too.
By R. Chandrasekaran
CHENNAI: India’s biggest bank, State Bank of India, reported a jump in non-performing assets (NPA) during the first quarter. This has partly affected its profitability too, thereby reducing its net profit by 14 percent in the first quarter.
SBI is not the only bank to report increased NPAs. Even the private sector banks such as HDFC Bank and Axis Bank too have reported slightly higher NPAs, thus indicating the business sluggishness during the June quarter.
SBI earned a profit of Rs.32.41 billion for the June quarter, down 14 percent from Rs.37.52 billion in the year-ago quarter. The profit number was lower than the Dalal Street brokers’ estimation of Rs.34.50 billion. This is also the second straight quarterly fall in profit for the largest bank in India.
However, net interest income advanced 3.5 percent to Rs.115.12 billion during the same period.
The fall in profit is attributed by many experts from the broking circles to increased operating costs, muted interest income growth and worsening asset quality. SBI’s gross non-performing asset (NPA) in the June quarter was 5.56 per cent, up from 4.75 per cent of the advances in the preceding quarter. Net NPAs also jumped to 2.83 per cent from 2.1 per cent during the same period.
Private sector bank, HDFC Bank too reported an increase in net NPA to 0.3 percent from 0.2 percent in the fourth quarter, while gross NPA rose to 1 percent in June quarter from 0.97 percent in the December quarter.
The higher NPAs reported by major banks during the just concluded June quarter indicates only the deteriorating health of the Indian companies. This is possibly due to sluggish demand resulting in manufacturing contraction and reduced consumer spending.
Now that the Reserve Bank of India and the government have taken various steps to tighten money supply, there could be more problem coming in for the banks on the NPAs front.
To contact the author, email to rchandrasekaran@americanbazaaronline.com