Religare Securities says stress in SBI books is 144% higher at Rs 76,500 crore, ICICI Bank is 35% higher at Rs 59,300 crore and Axis Bank 39% higher at Rs 31,500 crore
Have State Bank of India (SBI), ICICI Bank and Axis Bank under-reported the stress on their books?
A research report from Religare Capital Markets said there is a wide divergence in the asset quality watch list calculations as the classifications are subjective in many cases.
However two other analysts said, "Banks have laid bare all their stress explaining every classification. A watch list is not a sacrosanct list where every stress is listed. Banks may have picked up certain accounts where they think there could be problems. Loans for most big banks are neatly classified stressed debt restructuring, 5/25 refinance, regular restructuring or classified as NPAs."
Religare said in its report, "The asset watchlists declared by banks last quarter are highly subjective and differ widely in terms of stressed asset inclusion. This makes comparisons problematic and, more importantly, runs the risk of severe understatement of bad loans. We wanted to streamline the watchlists to enable a peer comparison and to garner a clearer idea of how well each bank really fares on the asset front."
All the three banks had put list of loans on their watchlists to be closely monitored in the coming quarters. For SBI, the watchlist was at Rs 31,000 crore, Axis Bank it was Rs 22,600 crore and ICICI Bank, it was Rs 44,000 crore.
"We arrived at stressed asset figures far in excess of those disclosed, that is 35% higher for ICICI Bank at Rs 59,300 crore, 39% higher for Axis Bank at Rs 31,500 crore and a whopping 144% higher for SBI at Rs 76,500 crore.
We will be closely watching the source of slippages emerging in the second and third quarter of 2016-17 for further evidence of the authenticity or lack thereof of bank watchlist."
For Axis Bank, Religare arrived at the figures by adding the non-funded exposure to stressed sectors,5:25 refinancing and the balance outstanding restructured/SDR loans. Since ICICI Bank watchlist was restricted to the top 5 sectors, the research team added exposure to other sectors using Axis Bank's disclosures as a base, and also included restructured assets. For SBI, it incorporated the restructured assets, SDR/5:25 exposure and potential bad power loans that had not been recognised in the bank's watchlist.
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