Tag: asset quality

Net profit rises 32% YoY to Rs 1,642 cr; asset quality weakens, BFSI News, ET BFSI

Banking & Finance

[ad_1]

Read More/Less


MUMBAI: Kotak Mahindra Bank today reported a 32 per cent year-on-year rise in its net profit to Rs 1,641.9 crore for the quarter ended June, which was below analysts’ expectations.

The private sector lender reported net interest income growth of 6 per cent on-year to Rs 3,942 crore, which was also below analysts’ estimates.

Provisions and contingencies in the quarter declined to Rs 935 crore from Rs 962 crore in the year-ago quarter. However, the lender saw a deterioration in asset quality in the reported quarter.

Kotak Bank’s gross non-performing loans ratio stood at 3.56 per cent in the reported quarter as against 3.25 per cent at the end of the March quarter. Similarly, the net NPA ratio expanded to 1.28 per cent from 1.21 per cent in the previous quarter.


The private sector bank’s net profit in the quarter was largely boosted by a sharp uptick in other income. Other income in the reported quarter jumped to Rs 1,583.03 crore from Rs 773.5 crore in the year-ago quarter.

Covid-related provisions as on June 30 were maintained at Rs 1,279 crore. In accordance with the Resolution Framework for Covid-19 and MSME announced by the RBI, the bank implemented total restructuring of Rs 552 crore as on June 30, Kotak Bank said.


In terms of loan growth, the quarter was tepid for the bank affected by the second wave as well as its conservative approach. Advances in the quarter grew merely 6 per cent on-year, which was lower than many of its peers.

At the same time, the current account-to-savings account ratio of the lender further improved to 60.2 per cent at the end of the June quarter from 56.7 per cent a year ago.

Kotak Bank’s operating performance was sturdy as operating profit jumped 19 per cent year-on-year to Rs 3,121 crore in the reported quarter.



[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , , , ,

Growth expectations of NBFCs moderated in Q1 FY22

Banking & Finance

[ad_1]

Read More/Less


Growth expectations of Non-Banking Financial Companies (NBFCs) have moderated vis-à-vis the expectations six months earlier in view of the possible impact of Covid 2.0 on business in Q1 (April-June) FY2022, according to an ICRA survey.

The survey expects the asset quality related pain to persist in the current fiscal as well.

As per the survey across NBFCs, covering over 65 non-banks, constituting about 60 per cent of the industry assets under management (AUM), 42 per cent of the issuers now expect growth of more than 15 per cent in the AUM in FY2022, much lower than 56 per cent earlier.

The survey includes Micro Finance Institutions (MFIs), NBFCs, and housing finance companies (HFCs), excluding infrastructure finance companies and Infrastructure Debt funds.

ALSO READ NBFC-MFIs: Sector sees nearly 25% decline in FY21

Manushree Saggar, Vice-President, Financial Sector Ratings, ICRA, said: “While 42 per cent of the issuers (by number) are expecting a more than 15 per cent growth in AUM in FY2022, the proportion based on AUM weights is much lower at 8 per cent; indicating that larger players in the segment expect a relatively moderate growth in FY2022.

“With most of the lenders (74 per cent; in AUM terms) indicating an up to 10 per cent AUM growth, we expect the growth for the overall industry to be about 7-9 per cent for FY2022.”

The agency emphasised that within the non-bank finance sector, segments such as MFIs, SME-focused NBFCs and affordable housing finance would continue to record much higher growth than the overall industry averages; supported by good demand and lower base.

Notwithstanding the optimism on AUM growth, the non-bank finance companies are expecting the asset quality related pain to persist in the current fiscal as well, opined ICRA.

The agency said said overall, 87 per cent of issuers (by AUM) expect reported gross stage-3/NPAs to be either same or higher than March 2021 levels, which in turn will keep the credit costs elevated.

This is also reflected in over 90 per cent of lenders (by AUM) expecting the credit costs to remain stable or increase further over FY2021 levels.

ALSO READ RBI links NBFC dividend payout to capital, NPA norms

Restructuring

On the restructuring front, while lenders are expecting marginally higher numbers as compared to the last fiscal, the overall numbers are expected to be low, the agency said in a note.

Almost 73 per cent of lenders (in AUM terms) have indicated an incremental restructuring of up to 2 per cent of AUM and another 21 per cent are expecting a restructuring between 2-4 per cent of the AUM, under Restructuring 2.0.

Within the non-bank finance sector, relatively higher impacted segments such as MFIs, SME lending and vehicles are expected to undergo larger share of restructuring compared with the industry average., according to the note.

The housing portfolio is likely to remain largely resilient, in line with the trend seen in FY2021.

Raise capital

The agency assessed that 80 per cent of the issuers are expected to maintain or increase on-balance sheet liquidity to take care of market volatility. Further, despite the pressure in the operating environment, 94 per cent of the issuers expect higher or stable profitability in FY2022 vis-à-vis FY2021.

The number of issuers expecting to raise capital almost doubled to 56 per cent this year compared with earlier survey results.

[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , , , ,

Q1FY22 results: Banks likely to report muted earnings, some stress in asset quality

Banking & Finance

[ad_1]

Read More/Less


Banks are likely to report muted earnings with pressure on asset quality for the first quarter of 2021-22, reflecting subdued economic activities due to localised lockdowns amidst the second wave of the pandemic.

A number of banks have already released provisional data on key business parameters for the quarter-ended June 30, 2021, that reflect muted growth in advances and robust increase in deposits.

Private sector banks are set to release their first quarter results in coming weeks. HDFC Bank will report its results on July 17, followed by others like Axis Bank and ICICI Bank.

Non-food bank credit growth slowed to 5.9 per cent in May compared with 6.1 per cent in the year-ago month, data from the Reserve Bank of India revealed.

Brokerage views

“We believe the first quarter of 2021-22 to be a quarter of consolidation as the momentum in recovery gained over the fourth quarter of 2020-21 was impacted by the second Covid wave, with the asset quality outlook deteriorating once again. Business activity was impacted over April and May 2021, and localised lockdowns were seen across most States. As a result, systemic growth moderated to 5.8 per cent as of June 18, 2021,” said a recent report by Motilal Oswal on first quarter earnings of banks.

“The second Covid wave, coupled with localised lockdowns, is likely to impact asset quality performances of banks,” it further said.

ICICI securities in a recent report noted that lead indicators point towards increased stress in the near term.

“…according to various management commentary, there has been a decline in collections by 2 per cent to 5 per cent range in April and May 2021 due to partial lockdowns,” it noted.

The RBI’s Financial Stability Report of July 2021 has noted that gross non-performing asset (GNPA) ratio of scheduled commercial banks may increase from 7.48 per cent in March 2021 to 9.80 per cent by March 2022 under the baseline scenario; and to 11.22 per cent under a severe stress scenario.

While the impact of the second wave of the pandemic is likely to be lower, restructuring requests are expected to be higher this year in the absence of a moratorium.

However, most experts believe that banks are in a better position to tide over the economic slowdown this time than last year.

“We believe that the banks are relatively better-placed to handle the stress from the second wave and hence we continue to maintain a stable outlook on the sector,” said Anil Gupta, Vice-President – Financial Sector Ratings, ICRA Ratings, in a recent report.

[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , ,

S&P revises ICICI Bank outlook to stable from negative, BFSI News, ET BFSI

Banking & Finance

[ad_1]

Read More/Less


NEW DELHI: S&P Global Ratings on Friday said it has revised the rating outlook on ICICI Bank Ltd to stable from negative on grounds that the lender will benefit from the sale of stake in subsidiaries.

The rating agency affirmed its ‘BBB-‘ long-term and ‘A-3’ short-term issuer credit ratings on ICICI Bank.

“We revised the rating outlook to reflect our view that ICICI Bank will maintain its strong capital position over the next 24 months. The bank will benefit from the sale of a stake in subsidiaries and gradual normalization of earnings, which should reduce risks associated with its capital position,” it said.

In a statement, S&P forecast that ICICI Bank will maintain a risk-adjusted capital (RAC) ratio of more than 10 per cent over the next 24 months.

“Our expectation factors in 13-14 per cent credit growth for the bank, an improvement in earnings, and sale of stake in insurance subsidiaries over the period,” it said.

ICICI Bank’s stressed loans (non-performing loans and restructured loans) are likely to remain high when compared to that of international peers.

The bank’s stressed loans are expected to peak at 6 per cent of total loans in the fiscal year ending March 2022, lower than the estimate of 11-12 per cent for the Indian banking industry.

“The bank’s new non-performing loans (NPLs) are likely to stay elevated in fiscal 2022 owing to the impact of the second wave of COVID-19 infections. In our view, localized lockdowns will hit small and midsize enterprise (SME) borrowers the most,” it said.

Retail loans, especially unsecured personal loans and credit card debt, are also vulnerable.

For ICICI Bank, SME loans (accounting for 4.2 per cent of total loans), personal loans (6.7 per cent), credit cards (2.4 per cent) and rural loans (10 per cent) could contribute to the increase in NPLs.

ICICI Bank has made COVID-19 related provisions to the tune of 1 per cent of advances.

This, S&P said, should help smoothen the hit from pandemic-related losses.

“The bank’s better customer profile and underwriting relative to the Indian banking system should limit losses,” it added.

ICICI Bank’s lower credit costs than in the past should enhance its profitability, it said estimated core earnings at 1.3-1.6 per cent of assets over the next two years, with further upside possible from the sale of stake in subsidiaries.

“The stable outlook reflects our view that ICICI Bank’s capitalization will remain strong over the next 24 months, aided by better earnings and profit from the sale of a stake in subsidiaries. We factor in a slight deterioration in the bank’s asset quality and performance due to COVID-19,” it said.

In its base case, ICICI Bank will maintain its strong market position, strong capital, better-than-system asset quality, and good funding and liquidity over the next 24 months.

“An upgrade of ICICI Bank is unlikely in the next one to two years because that would require an improvement in the bank’s financial profile as well as the sovereign credit rating on India.

“Our assessment of ICICI Bank’s financial profile may improve if the bank’s asset quality strengthens to levels in line with international peers, and it maintains its capitalization at a strong level,” it said.



[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , , ,

City Union Bank hopes to maintain better asset quality in FY22 amid second wave blues

Banking & Finance

[ad_1]

Read More/Less


Leading old private sector lender City Union Bank hopes that FY22 will not be as bad as FY21 and credit growth this fiscal for the bank could be in the mid- to high-single digit if the economic environment and Covid second wave behaved like last year.

“Though the impact of the second wave is much higher in terms of infection and mortality, its impact on bank’s growth and other parameters may not be as bad as it saw in the first wave. I do not say that we will be seeing milk and honey flowing, but it looks like now things are not as bad as the same time last year,” N Kamakodi, Managing Director & CEO, told the Q4FY21 earnings conference call.

The bank’s credit growth in first wave hit-FY21 was 7 per cent and the slippage ratio to closing advances was at 3.01%.

He said the adverse impact of the second wave on the growth and slippages would definitely be there, but it may not be as bad as the first wave. FY21 almost ended like what we thought during the beginning of the year, and we hope FY22 will not be as bad FY21. It should be slightly better, he added.

At the same time, the total lockdown in three States particularly in Tamil Nadu where CUB has the bulk of its operations, the collection efforts are dampened and some impact on the collections are there. There are no property sale transactions as government registration departments are closed. Hence, the bank expects to see some spike, but overall slippages will be slightly better than FY21.

“We expect even though for the year as a whole the slippage may be slightly lower than whatever we saw in FY21, the slippages could be front loaded may be in the first one or two quarters and we will be seeing things getting eased up once the lockdown is removed,” Kamakodi said.

The bank expects its gross and net NPA to be lower than FY21 amid some quarterly spikes.

ECLGS scheme

In FY21, the major credit growth came from jewel loan and extension of facility to ECLGS scheme. Of the ECLGS scheme under ECLGS 1, 2, and 3, it disbursed ₹2,096 crore for an exposure of about ₹10,445 crore constituting about 5.63 per cent of the advances.

“We expect a further sanction of about ₹200 crore from ECLGS 3.0 scheme. The government guaranteed ECLGS scheme 1, 2 and 3, in fact most of the credit of MSMEs and also non-MSME sector and businesses have started generating surplus. This has also resulted in improving capital adequacy ratio as the disbursement to the ECLGS scheme attracts no risk weight and is guaranteed by the government,” said Kamakodi.

The total restructured portfolio for MSME account on March 31, 2021 stood at ₹1,849 crore and overall percentage restructured account constituted about 4.99 per cent.

[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , , , ,

CSB Bank posts highest-ever net profit in FY21 at Rs 218 cr; Q4 net at Rs 43 cr, BFSI News, ET BFSI

Banking & Finance

[ad_1]

Read More/Less


New Delhi: Private sector CSB Bank on Saturday posted an all-time high net profit of Rs 218.40 crore for the fiscal ended March 2021. “The bank recorded an all-time high net profit of Rs 218.40 crore in FY21 as against Rs 12.72 crore in FY20, an increase of 1,617 per cent,” CSB Bank said in a regulatory filing.

During the last quarter ended March of FY21, the lender reported a net profit of Rs 42.89 crore against a loss of Rs 59.70 crore in the same quarter of 2019-20, CSB Bank said.

Total income during the reported quarter grew to Rs 609.45 crore as against Rs 475.49 crore in the same period a year ago. Interest income moved up by 28 per cent to Rs 497 crore.

The full-year income too increased to Rs 2,273.11 crore in FY21 from Rs 1,731.50 crore in FY20. Interest income during the year was at Rs 1,872 crore as against Rs 1,510 crore.

Bank’s asset quality improved as the gross non-performing assets (NPAs) fell to 2.68 per cent of the gross advances as of March 31, 2021 as against 3.54 per cent by end of March 2020. In absolute value, the gross NPAs or bad loans amounted to Rs 393.49 crore, compared with Rs 409.43 crore a year ago.

Net NPAs also fell to 1.17 per cent (Rs 168.81 crore) from 1.91 per cent (Rs 216.94 crore).

Provisions for bad loans and contingencies were down in Q4FY21 at Rs 70.95 crore as compared with Rs 84.32 crore parked aside in the year-ago period.

CSB Bank said its advances grew by 27 per cent mainly contributed by gold loan growth of 61 per cent.

Deposits at end of March this year grew to Rs 19,140 crore as against Rs 15,791 crore a year ago, while the advances were up at Rs 14,438 crore as against Rs 11,366 crore.

Total business has grown by Rs 6,421 crore or by 24 per cent year-on-year, it said, adding, thus in the centenary year the bank has grown a fourth of the total business it grew in past 99 years.

The lender said it has a comfortable liquidity position with liquidity coverage ratio of 210.39 per cent which is well above the RBI requirement.

“While the industry grew by approx 12 per cent in deposits and 6 per cent in advances, we could outperform by recording 21 per cent and 27 per cent growth in deposits and advances, respectively. In terms of overall business, bank has grown a fourth…We could also open 101 branches in this 101st year of existence. In terms of profitability, we could break all the past records by crossing the Rs 200 crore mark,” said C V R Rajendran, Managing Director & CEO, CSB Bank.

He said gold loans, two wheeler loans, agri loans, MSME abd SME loans will continue to be the main focus areas of the bank.

While digital will be the main mantra, the bank also plans to add close to 200 branches to its network in FY22 so that there is proper mix of brick and click banking, Rajendran said.

“Though we may have to wait for a month or so to fully understand the impact of second wave of Covid-19, we are optimistic in our outlook to continue the good work in FY22 as well,” he added.



[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , ,

Net profit soars 190% to Rs 876 cr, beats estimates; firm to pay Rs 5 dividend, BFSI News, ET BFSI

Banking & Finance

[ad_1]

Read More/Less


MUMBAI: IndusInd Bank today reported a 190 per cent year-on-year rise in its net profit for the quarter ended March to Rs 876 crore, which was above analysts’ estimates.

The lender reported a net interest income of Rs 3,534.6 crore for the reported quarter, which was also higher than analysts’ estimates of Rs 3,476 crore.

The lender’s asset quality in the quarter, however, deteriorated on a sequential basis. The bank reported gross non-performing assets ratio of 2.67 per cent as against 1.74 per cent in the previous quarter.

IndusInd Bank’s net non-performing assets ratio stood at 0.69 per cent at the end of the March quarter as against 0.22 per cent in the previous quarter.

The bank said that its board has approved a final dividend of Rs 5 per share.

The lender’s bottomline was boosted by a 23.5 per cent year-on-year fall in provisions and contingencies during the quarter to Rs 1,865 crore.

IndusInd Bank said that it has made provisions of Rs 2,208 crore till March 31 on account of the Covid-19 pandemic and the high uncertainty created by the second wave.

Shares of IndusInd Bank ended 0.5 per cent lower at Rs 934.95 on the National Stock Exchange.



[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , ,

Credit costs to remain elevated for NBFCs: CARE Ratings

Banking & Finance

[ad_1]

Read More/Less


Credit rating agency CARE Ratings expects credit costs to remain elevated for non-banking finance companies (NBFCs) in FY22 amid the second wave of Covid-19 pandemic.

For FY22, CARE Ratings expects a level of stress, especially in the loan portfolio under restructuring and those which were under moratorium, the impact is likely to be visible in the next one year.

“As such, delinquencies are estimated to rise moderately,” according to a report by the credit rating agency.

The agency observed that NBFCs have been grappling with a succession of uncertain events since 2016 — demonetisation, Goods and Service Tax (GST) implementation, liquidity crisis in 2018 and Covid-19 pandemic in 2020.

These uncertain events derailed growth, disrupted collections and increased loan loss provisioning across asset classes.

Financial metrics

“From Q4 (January-March) FY20, credit costs across major NBFC sub-segments reported substantial increase and has remained at elevated levels. This affected the financial metrics for H1 (April-September) FY21 negatively,” the report said.

Also read: FIDC seeks relief measures in wake of second Covid wave

The agency assessed that after September 2020, the economy re-opened with signs of revival which led to improvement in the sector, collections inched closer to pre-Covid levels and growth gathered momentum. But the second wave of Covid-19 has pulled back the recovery gains with subsequent impact on asset quality.

[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , ,

Bajaj Finance posts a stellar Q4, but Covid shadow looms, BFSI News, ET BFSI

Banking & Finance

[ad_1]

Read More/Less


Bajaj Finance Ltd today posted a 30.2% on-year rise in its net profit for Jan-Mar to Rs 1,161 crore as it inched closer to pre-pandemic levels.

New loans booked during Q4 FY21 fell to 54.7 lakh (5.47 million) as against 60.3 lakh (6.03 million) in the same quarter a year ago, which shows that the consumer lending business is yet to pick up full steam.

Net interest income during the quarter dipped 1 per cent to Rs 4,659 crore from Rs 4,684 crore in Q4 FY20, it said.

Total income fell by 5 per cent to Rs 6,855 crore from Rs 7,231 crore earlier.

“4QFY21 was a healthy quarter for Bajaj Finance. Disbursements have exceeded 90% of YoY levels across most segments. The initial asset quality performance of incremental disbursements is in line with or marginally better than pre-Covid levels. This bodes well for asset quality in the medium term. In the near term, we do not foresee any major asset quality disruption, unless the impact of the second wave is worse than expected,” Motilal Oswal Securities wrote in a note, while upgrading the stock to ‘Buy’.

Assets under management

On a consolidated basis, the company’s assets under management as of March 31, 2021, increased by 4 per cent to Rs 1.52 lakh crore as against Rs 1.47 lakh crore. However, this growth came mainly due to a 19% jump in mortgages of subsidiary Bajaj Housing Finance.

However, the company said that despite the Covid disruptions, it would be able to grow back to pre-pandemic levels.

In the last 7–10 days, the company has continued to originate 50–55% of daily volumes in the B2B business, 80–85% in the B2C and SME businesses, and 40–50% in Mortgages. However, the company has said that barring a national lockdown, three-four large GDP-contributing states going into simultaneous lockdown for three-five weeks and another moratorium on loan repayment, it is confident of delivering its long-term guidance metrics in FY22.

Despite significant disruptions, Bajaj Finance remains open for business across geographies, in line with local administration advisories.

New loan originations, barring auto finance, are back at pre-Covid levels. The wallet loans business (paused) and retail EMI business have moderated and is doing 50K/month instead of a 150K/month run-rate.

Non-performing assets

The gross and net non-performing assets (NPAs) stood at 1.79 per cent and 0.75 per cent respectively by end of March 2021, as against 1.61 per cent and 0.65 per cent earlier.

The company has a provisioning coverage ratio of 58 per cent on stage 3 assets (NPAs) and 181 basis points on stage 1 and 2 assets as of March 31, 2021.

“Loan losses and provisions for FY21 was Rs 5,969 crore as against Rs 3,929 crore in FY20. During the year, the company has done accelerated write-offs of Rs 3,500 crore of principal outstanding on account of Covid-19 related stress and advancement of its write off policy.

“The company holds a management overlay and macro provision of Rs 840 crore as of March 31, 2021,” it added.

Bajaj Finance said its board of directors has recommended a dividend of Rs 10 per equity share for FY21.

Subscribe to ETBFSI Daily Newsletter and stay updated.
https://bfsi.economictimes.indiatimes.com/etnewsletter.php



[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , , ,

ICRA: Uncertainties with rising Covid cases could compound NBFCs woes

Banking & Finance

[ad_1]

Read More/Less


The resurgence of the Covid-19 pandemic is likely to impact the performance of assets under management of retail NBFCs in 2021-22, rating agency ICRA said on Wednesday.

“Domestic Retail-NBFC AUM are facing asset quality headwinds which will moderate growth in 2020-21 and is also likely to affect their performance in 2021-22, following resurgence of the Covid-19 pandemic,” it said in a statement.

Higher loan losses seen

Asset quality pressures would play out fully in this fiscal as the level of economic activities are yet to substantially pick up over the pre-Covid levels, with risks further compounded by recent rise in infection rate, it further said.

While NBFCs can proceed with the overdue recoveries post lifting of the Supreme Court order on the NPA classification in March 2021, ICRA notes that performance of most of the key target asset and borrower segments continues to be sub-optimal, which would impact realisations leading to higher loan losses.

“Entities have augmented their provisions steadily since the fourth quarter of 2019-20 and are currently carrying provisions of more than 50 per cent of the pre-Covid levels, the same is expected to be maintained at least for a few more quarters in view of the current uncertainties,” it said.

AM Karthik, Vice President, Sector-Head Financial Sector Ratings, ICRA, said, “Restructuring expectation averages around 2.6 per cent (ICRA sample of large NBFCs) presently and we expect reported Gross Stage 3 to increase steadily by about 50-100 basis points (over December 2020 levels) by March 2022, as a base case; and could inch-up further if the impact of the pandemic continues for longer period leading to lockdowns or other tighter restrictions.”

Revival in growth

ICRA expects the Retail-NBFC AUM, which is estimated to be about ₹10-lakh crore as of December 2020, to have grown by three to five per cent in 2020-21 as pent-up demand, post the lockdown, led to some revival in segments such as namely gold, microfinance, two-wheelers, and tractors.

In 2021-22, growth is expected to revive to about eight per cent to 10 per cent driven by improvement in demand from all key target segments compared to last fiscal.

Growth, however, would be contingent upon access to adequate funding lines, it further said, adding that the capital structure is expected to remain adequate.

[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , , , ,
1 2 3