Category: Banking & Finance

RBL Bank Q3 net profit surges to ₹147 crore

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RBL Bank’s net profit more than doubled in the third quarter of the fiscal year to ₹147.06 crore as against ₹69.95 crore in the same period last fiscal.

For the quarter ended December 31, 2020, its net interest income fell by two per cent to ₹908 crore against ₹923 crore a year ago.

Net interest margin also fell to 4.19 per cent at the end of the third quarter this fiscal from 4.57 per cent a year ago.

Other income surged by 19 per cent to ₹580 crore in the October to December 2020 quarter versus ₹487 crore a year ago.

“Our capital and liquidity levels continue to be robust. It has been heartening to see the growth in the deposit franchise and we continue to grow granular deposits and reducing our funding and operating costs this financial year, making us more competitive as an institution,” said Vishwavir Ahuja, Managing Director and CEO, RBL Bank.

Provisions fell by two per cent to ₹609.76 crore in the third quarter this fiscal from ₹622.84 crore a year ago.

Gross non-performing assets eased to ₹1,050.21 crore or 1.84 per cent as on December 31, 2020 as against 3.33 per cent a year ago. Net NPAs stood at 0.71 per cent of net advances at the end of the third quarter this fiscal from 2.07 per cent a year ago.

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IDBI Bank back in black, posts ₹378-cr net profit in Q3

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IDBI Bank reported a net profit of ₹378 crore in the third quarter ended December 31, 2020 against a net loss of ₹5,763 crore in the year ago period.

The bottomline was buoyed by a 89 per cent year-on-year (yoy) decline in provisions for bad loans, ₹ 105 crore write-back in provisions for depreciation in investments and ₹ 323 crore profit the Bank booked by selling a portion of its stake in its life insurance joint venture.

Net interest income (difference between interest earned and interest expended) was up 18 per cent yoy at ₹ 1,810 crore (₹ 1,532 crore in the year ago period).

Other income, including income activities such as commission, fees, earnings from foreign exchange and derivative transactions, profit and loss from sale of investments and recoveries from written off accounts, increased 7 per cent yoy to ₹1,368 crore (₹ 1,279 crore).

Bad loans

Gross non-performing assets (GNPAs) declined to ₹ 3,532 crore during the reporting quarter.

GNPAs declined to 23.52 per cent of gross advances as at December-end 2020 against 25.08 per cent as at September-end 2020.

Net NPAs declined to 1.94 per cent of net advances as at December-end 2020 against 2.67 per cent as at September-end 2020.

With proforma slippages (adjusted for the Supreme Court’s interim order), Gross and Net NPA ratio would have been 24.33 per cent and 2.75 per cent, respectively.

A break-up of the provisions shows that provisions towards NPAs and bad debts written-off declined to ₹ 49 crore (₹ 440 crore) and ₹ 208 crore (₹ 332 crore), respectively.

However, provisions towards standard assets rose to ₹624 crore (₹ 68 crore).

In its notes to accounts, the Bank said it has made additional provision of ₹ 941 crore over and above the IRAC/ income recognition and asset classification norms (includes shifting of ICA/ Inter-Creditor Agreement provision of ₹ 395 crore to IRAC provision) in respect of certain borrower accounts in view of the inherent risk and uncertainty of recovery in these identified accounts.

Global gross advances were down 7 per cent yoy to stand at ₹ 1,59,663 crore. This was mainly due to 18 per cent yoy decline in corporate advances. Retail advances edged up 1 per cent.

Total deposits increased about 3 per cent yoy to ₹ 2,24,399 crore. The share of low-cost of current account, savings account (CASA) in total deposits improved to 48.97 per cent from 47.65 per cent in the year ago quarter.

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Tata Asset Management, DSP Investment Managers and Axis Asset Management apply for licences

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Pension regulator PFRDA has received 10 applications including three from new ones for the Request for Proposal (RFP) it had floated for selection of sponsors of pension funds for National Pension System (NPS).

While seven of these are from existing pension fund managers, the three new ones are Tata Asset Management Company, DSP Investment Managers (India) Pvt Ltd and Axis Asset Management, sources close to the development said.

The seven pension fund managers who already manage NPS funds are the pension arms of SBI, UTI, LIC, ICICI, HDFC, Aditya Birla Sun Life and Kotak.

PFRDA issues RFP for selection of pension fund sponsors

It maybe recalled that PFRDA had in December 2020 come out with a new RFP for selection of sponsors of pension funds for NPS, throwing open the door for more pension fund managers with at least five-fold jump in their fees, making it lucrative.

The Pension Fund Regulatory and Development Authority (PFRDA) had taken this big initiative to revamp the pension funds management structure in India and position the industry for strong decadal growth that could take the overall assets under management of NPS to ₹30-lakh crore by 2030.

The main objective behind the RFP is to expand the number of players (only serious) in the pension industry and ensure that existing as well as new players are better remunerated in terms of fund management fees in line with the size of their operations.

This latest RFP had several firsts to its credit. This is the first time PFRDA had come out with a combined RFP — both for the government and private sector. For the government, the last RFP was in 2012 and in 2013-14 for the private sector. They had different structures and restrictions.

Slab structure

The Government was open for certain state-controlled pension fund managers and the private sector was open for all. In April 2019, the government had allowed even private pension fund managers to manage NPS funds of government schemes. Now, there is no distinction between government, PSU or private pension fund managers.

Strong show: Pension assets surge 35.65% as of November 2020

This is also the first RFP where PFRDA had specified a slab structure for investment management fee. In the earlier regime, it was a flat fee. PFRDA has now gone in for a graded slab structure (four slabs from 3 paise to 9 paise) so that the new entrants to this field will not find it difficult to build a corpus. This will help them achieve scale while meeting their early establishment expenses. From a previous regime fee level of 1 paisa for every ₹100 of pension funds managed, PFRDA has now proposed an average fee of 5 paisa per ₹100 of pension monies managed. This is a five-time increase. This effective fee of about 5 paise is the cheapest in the pension world and PFRDA pricing is the most competitive.

With increase in fee structure, it is expected that pension fund managers will make profit while having funds for building infrastructure and support team.

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RBI sets out enhanced norms to improve grievance redress mechanism at bank

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Suggested keywords: disclosures, customer complaints, cost-recovery framework, grievance redress mechanism, banks

Enhanced disclosures on customer complaints and operationalisation of a cost-recovery framework have been prescribed by the Reserve Bank of India (RBI) to strengthen and improve the efficacy of the grievance redress mechanism of banks.

Further, the central bank will undertake intensive review of the grievance redress mechanism of banks having persisting issues in their redress mechanism.

Based on the review, a remedial action plan will be formulated and formally communicated to banks for implementation within a specific time frame.

In case no improvement is observed in the grievance redress mechanism within the prescribed timelines despite the measures undertaken, the bank(s) will be subjected to corrective actions through appropriate regulatory and supervisory measures, RBI said in a notification to all Scheduled Commercial Banks (excluding Regional Rural Banks).

Granular disclosures

Granular disclosures on complaints and grievance redress include providing summary information on complaints received by the bank from customers and from the Offices of Banking Ombudsman (OBOs), and top five grounds of complaints received by the bank from customers.

“Disclosures serve as an important tool for market discipline as well as for consumer awareness and protection.

“Appropriate disclosures relating to the number and nature of customer complaints and their redress facilitate customers and interested market participants to better differentiate among banks to take an informed decision in availing their products and services,” the notification said.

Cost-recovery framework

RBI said it will operationalise the cost-recovery framework for banks, whereby the cost of redress of maintainable complaints will be recovered from the banks against whom the number of complaints received in OBOs are in excess of their peer group averages.

For this, peer groups based on the asset size of banks as on March 31 of the previous year, will be identified.

Peer group averages of maintainable complaints received in OBOs would be computed on three parameters — average number of maintainable complaints per branch, average number of maintainable complaints per 1,000 accounts (total of deposit and credit accounts) held by the bank, and average number of maintainable digital complaints per 1,000 digital transactions executed through the bank by its customers.

The cost of redress to be recovered in this respect will be the average cost of handling a complaint at the OBOs during the year.

Intensive review

RBI will undertake, as part of its supervisory mechanism, annual assessments of customer service and grievance redress in banks, based on the data and information available through the Complaint Management System, and other sources and interactions.

Banks identified as having persisting issues in grievance redress will be subjected to an intensive review of their grievance redress mechanism to better identify the underlying systemic issues and initiate corrective measures.

The intensive review will include, but not be limited to, areas such as adequacy of customer service and customer grievance redress-related policies, functioning of the Customer Service Committee of the Board, level of involvement of the top management in customer service and customer grievance-related issues, and effectiveness of the grievance redress mechanism of banks.

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Net profit falls 36% to Rs 1,117 cr while NII rises 14%, BFSI News, ET BFSI

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The fourth largest private sector lender by market capitalisation, Axis Bank has reported a significant 36.4 percent year-on-year (YoY) decline in standalone profit for the quarter ended December 2020 with elevated provisions (up 33 percent YoY).

Net Interest Income (NII) for the quarter rose 14% to Rs 7,373 crore from Rs 6,453 crore in the year-ago quarter. Net interest margin (NIM) for the quarter rose to 3.59% compared with 3.57% in the year-ago quarter

“The bank holds cumulative provisions (standard + additional other than NPA) of Rs 11,856 crore at the end of Q3FY21. It is pertinent to note that this is over and above the NPA provisioning included in our PCR calculations. These cumulative provisions translate to a standard asset coverage of 2.08 per cent as on December 31. On an aggregated basis, our provision coverage ratio stands at 116 per cent,” the bank said

According to the bank’s BSE filing, In the December quarter, the bank reported Gross NPA and net NPA at 3.44% and 0.74% respectively as against 4.18% and 0.98% during the September quarter. The restructured loans as at 31st December, 2020 stood at ₹2,709 crore that translates to 0.42% of the gross customer assets.

According to Puneet Sharma, chief financial officer at Axis Bank, about 83% of the slippages during the quarter came from the retail segment, which included both secured and unsecured accounts. “These are accounts which were under moratorium between March and August..We are expecting the fourth quarter slippages number to improve from the December quarter. We are counting FY22 as a look forward year.”

The rise in slippages from Axis Bank’s retail loan portfolio has led to tightening of credit norms by the bank, especially in the retail book.

Total number of provisions and contingencies for the quarter stood at Rs 4,604.28, which was higher than Rs 4,580.65 crore that it reported in the September quarter and Rs 3,470.92 crore in the year-ago quarter.



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Axis Bank shares decline over 2% in early trade; bounces back later

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Shares of Axis Bank on Thursday declined over 2 per cent in early trade after the company reported a 29 per cent decline in December quarter consolidated net.

The stock opened on a weak note and further dipped 2.35 per cent to ₹617 on the BSE. But it soon bounced back wiping out the early losses and was trading in the green at ₹643.05, registering a gain of 1.76 per cent.

At the NSE also, it opened lower and declined 2.54 per cent to ₹616. In a similar trend, it bounced back as the trade progressed to quote at ₹641.20, up 1.44 per cent.

The country’s third largest private sector lender Axis Bank on Wednesday reported a 29 per cent decline in December quarter consolidated net at ₹1,334 crore, and reported a spike in non-performing assets from the retail assets side. In the 2019 December quarter, consolidated net profit was at ₹1,884 crore.

On a standalone basis, the city-based bank’s net profit for the October-December period declined 36 per cent to ₹1,116 crore from ₹1,757 crore in the same period a year ago. It reported fresh slippages of ₹6,736 crore under the IRAC norms, as against ₹6,214 crore in the year-ago period.

The same had come down to ₹1,572 crore in the preceding September quarter.

A bulk 83 per cent of the fresh slippages came from retail assets, which had become a focus area for lenders across the system in the last few years because of its perceived resilience in face of stress being reported by the corporate segment.

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Axis Bank net dips 36%, prudent expenses hit PAT

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Its operating profit rose 6% YoY to Rs 6,096 crore.

Axis Bank on Wednesday reported a 36% year-on-year (y-o-y) drop in net profit for the December quarter (Q3FY21) to Rs 1,117 crore on higher provisions. The bottom-line was lower than the Bloomberg estimate of Rs 2,760 crore. The bank’s provisions rose 33% YoY to Rs 4,604 crore, but remained flat sequentially. The bank said the profits after tax for the quarter were adversely impacted to the extent of Rs 1,050 crore on account of prudent expenses and provisioning charges. Its operating profit rose 6% YoY to Rs 6,096 crore.

MD and CEO Amitabh Chaudhry said, “We have done provisioning as if Supreme Court standstill on recognising fresh NPAs was not there. As the economy turns around, we see a fresh enthusiasm and positivity returning to both retail and corporate business,” he said. “The sectors like housing, cement and steel have been surprisingly strong, and we expect this momentum to continue,” the MD added.

The net interest income (NII) increased 14% YoY and 2% QoQ to Rs 7,373 crore. The net interest margin (NIM) remained at 3.59%, a jump of 2 basis points (bps) YoY and 1 bps QoQ. The bank has made provisions on accounts more than 90 days past due (90+ DPD), which were not classified as non-performing assets (NPA) pursuant to the SC’s direction. The apex court had earlier directed lenders not to recognise fresh NPAs till further orders in the interest-on-interest case.

Provisioning coverage ratio (PCR) improved to 75% in the third quarter, compared to 60% in the same quarter last year. “On an aggregated basis, our provision coverage ratio stands at 116% gross NPAs,” the bank said.

The asset quality, however, showed an improvement. The gross NPA ratio improved 74 bps to 3.44%, compared to 4.18% in the previous quarter. Similarly, net NPA ratio came down 24 bps to 0.74% from 0.98% in the September quarter. Without SC standstill on declaring fresh NPAs, gross NPA ratio would have been at 4.55% and the net NPA ratio at 1.19%, the bank said.

Gross slippages during the quarter surged to Rs 6,736 crore, compared to Rs 1,572 crore in Q2FY21 and Rs 6,214 crore in Q3FY20. The bank said 85% of the slippages had come from the retail segment. However, the management believes next quarter will be better than the current one.

Puneet Sharma, CFO, Axis Bank, said, “We believe Q4 will be better than Q3 in terms of asset quality.”

Recoveries and upgrades from NPAs during the quarter were at Rs 905 crore, while write-offs were at Rs 4,258 crore. The restructured loans stood at Rs 2,709 crore that translated to 0.42% of the gross customer assets.

The RBI had earlier allowed one-time restructuring for borrowers impacted by Covid-19. Advances during the quarter grew 6% YoY and 1% QoQ to Rs 5.83 lakh crore. The bank also said retail disbursements for the quarter were at all-time highs.

Deposits grew 10.5% YoY and 3% QoQ to Rs 6.54 lakh crore in Q3FY21. Current account savings account (CASA) ratio improved 232 bps YoY and 158 bps QoQ to 42%. The lender’s other income remained flat on a y-o-y and q-o-q basis at Rs 3,776 crore. The fee income, however, showed 5% y-o-y and 6% q-o-q increase to Rs 2,906 crore. The capital adequacy stood at 19.31% at the end of December.

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Govt must think of many AIFs, rather than one bad bank: Kotak

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Instead of setting up just a single bad bank, the Centre should consider floating multiple such outfits in the form of Alternate Infrastructure Funds, Uday Kotak, Managing Director and CEO, Kotak Mahindra Bank, and President, Confederation of Indian Industry, said. The veteran banker also suggested the setting up of a development financial institution for infrastructure, while speaking at BusinessLine’s Countdown to Budget 2021 event on Wednesday.

“One of the suggestions we have made from the CII is rather than thinking about just one single bad bank, where you have a big challenge of clearing price, allow floatation of multiple bad banks in the form of Alternate Infrastructure Funds registered under SEBI. They should also be allowed to buy, in addition to securities, loans from banks and NBFCs balance-sheets and to be considered as part of the permitted activity for AIFs,” Kotak said while delivering the keynote address at the HDFC Bank powered conference themed ‘Unleashing the animal spirit in a pandemic hit economy’ .

‘Needed, a DFI’

He also suggested setting up of a development financial institutions.“The reason is if you look at NABARD, which has been a success in rural and agriculture, or SIDBI in the area of MSMEs, the time has come for a massive infra push for India’s growth transformation and through that creating a reverse demand for various other products and services. A DFI, with a creative way of funding that institution with long-term money, is something that may be appropriate,” he said.

Budget 2021-22, which is being presented amidst the Covid-19 pandemic, is not just about arithmetic but also about being a policy document that spells out a new future for the country, Kotak said.

“We are in the best of times, the worst of times…the pandemic is a once-in-a-hundred year event. For all the challenges it has created to lives and livelihood, it is also the best time for us to grasp the opportunity of a transforming world economy, Indian economy, and society,” Kotak said.

Five focus areas

He underlined five key focus areas that the Budget should focus on. These include infrastructure, healthcare, education, sustainability, and defence. Additionally, there is a need for a continued push in three areas of private investments, jobs and digitisation.

Finance Minister Nirmala Sitharaman, who will present the Budget on February 1, has promised a “never before” like Union Budget as the government looks to boost growth amidst the pandemic.

“I genuinely hope this Budget will live up to the expectation that it is a Budget like never before,” Kotak said.

He also called for a gradual normalisation of the fiscal deficit over a three-year period and recommended a stable tax and interest rate regime.

 

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PNB Housing Finance Q3 net profit dips to ₹232 crore

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PNB Housing Finance Limited (PNBHFL) reported a net profit of ₹232 crore for the third quarter ended December 31, 2020.

This was marginally lower to the net profit of ₹237 crore recorded in the same quarter last fiscal. The latest bottom line was also lower than the net profit of ₹313 crore recorded in the second quarter ended September 30, 2020.

Total income for the quarter under review declined to ₹1896 crore, down 9 per cent over total revenue of ₹2075 crore in the same quarter last fiscal. In the previous September quarter, this home loan lender had recorded total revenue of ₹2022 crore.

For the nine months ended December 31, PNBHFL reported a 10 per cent decline in net profit at ₹803 crore (₹888 crore). Total Revenue declined 11 per cent to ₹5,790 crore (₹6,538 crore )

Commenting on the financial performance, Hardayal Prasad, Managing Director & CEO, PNBHFL said in a statement ”Post RBI moratorium, the Company witnessed an impact on collection efficiency. However, the situation is improving and with various measures under taken, we expect to reach pre-Covid efficiency levels in near term. The Company has set out its new agenda with focus upon Strengthening the core, Driving efficiency and Accelerating Growth. These are built upon 7 core pillars viz Management, Capital Position, Risk Management, Cost Management, Digital Drive, Retail Focused Lending and Grow Affordable Housing”.

PNBHFL’s Net Interest Margin increased 20 basis points to 3.2 per cent in the third quarter this fiscal from a level of 3 per cent in the same quarter last fiscal.

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Bank of Baroda plans to raise up to ₹4,000 crore via QIP

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Bank of Baroda (BoB) is planning to raise ₹2,000 crore to ₹4,000 crore via a qualified institutions placement (QIP) in the current quarter ending March 31, 2021.

Sanjiv Chadha, MD & CEO, said: “We are looking at accessing the market in the current quarter for a QIP, which might be in the ₹2,000 crore to ₹4,000 crore range.”

Chadha believes BoB’s capital position remains satisfactory as it has already raised about ₹3,700 crore by way of Additional Tier-1 (AT-1) bonds as against ₹4,500 crore it had targeted.

The BoB chief emphasised that if internal accruals and AT-1 inflows are added back (they are not added back in the third quarter as per accounting norms), the Bank’s capital adequacy ratio would have been at 13.41 per cent, which is pretty much the same level at which it had started the current financial year.

Referring to the optimum deployment of surplus in some short-term loans, which carried a higher risk weight of about 150 per cent, Chadha observed that going ahead, as these loans are paid off, there will be a release of capital. On average, BoB’s risk-weighted assets are about 50 per cent of loans.

“So, this capital release along with QIP and also the accruals that we expect, both in the balance part of this year as well as next year, we believe are adequate to take care of any kind of stresses that might be there as also our growth ambitions,” the BoB Chief said.

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