Skeletons are tumbling out of the cupboard after the Reserve Bank of India (RBI)'s review of bank's accounts. Banks have started reporting losses as they set aside capital buffers to cushion the weak or bad loans that they were carrying on as standard assets.
India's third-largest public sector bank, Punjab National Bank (PNB) with a 62% government stake, reported a 93% dip in its net profit to Rs 51 crore. Had it not been for a tax write-back of Rs 910 crore, it would have been a quarterly loss for the bank at Rs 858 crore.
The gross NPAs (non-performing loans or loans where the interest and principal have been due for over 90 days) of the bank stood at Rs 34,338 crore with fresh additions in the quarter of Rs 13,482 crore, the highest ever fresh additions, according to analysts. The fresh bad loans were from large corporate accounts in the steel and power sectors.
Usha Ananthasubramanian, chief executive officer, PNB, said in a press conference in Delhi, "The surgery is not over. The next quarter as well ... I should say the clean-up process is underway."
Provisions expenses increased 157.2% year on year and 100.6% quarter on quarter (QoQ) to Rs 3,776 crore led by the very high level of gross NPA formation.
The PNB stock fell nearly 7% to Rs 87.85 on the BSE on Tuesday following the dismal results. Reliance Securities said in a report, "Gross NPA grew 37.7% year on year to Rs 34,300 crore led by the highest ever fresh slippages. Major increase in fresh slippages was due to the review of stressed accounts by RBI."
Mumbai-based Dena Bank, which is 65% held by the government, reported a net loss of Rs 662.85 crore for the quarter ended December 31, 2015, as against net profit of Rs 76.56 crore in the corresponding quarter of the previous year and Rs 38.76 crore in the preceding quarter. Gross NPAs of the bank grew 4.24% over the previous year to Rs 7,916 crore and the fresh additions to the NPAs during the quarter was Rs 2,633.85 crore.
Provisions stood at Rs 966.97 crore, recording a fourfold rise over the previous year and a threefold increase from the preceding quarter.
The stock plummeted 12% to close at Rs 31.25 on Tuesday on BSE. The bank's net interest income stood at Rs 566.49 crore, registering decline of 5.95% year on year and 13.76% quarter on quarter.
Central Bank of India, which is 81.4% government-owned, reported a net loss of Rs 837 crore as its provisions for bad loans more than doubled to Rs 1,499.05 crore for the quarter ended December 31, 2015, from Rs 698.97 crore a year back. The gross NPAs of the bank were at Rs 17,563 crore with fresh NPAs during the quarter at Rs 4205.68 crore.
Religare Securities, in a note to investors, said, "We slash our FY16-FY18 earnings estimates of PNB by 15-46% on lower Q3 earnings, mounting provisions and sustained pressure on asset quality and margins." Its asset quality deteriorated as slippages jumped to Rs 13,500 crore, of which Rs 5,500 crore stemmed from RBI's asset quality review. "Management stated that 55% of RBI's review impact has been recognised and the balance will be accounted for in Q4."
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