Tag: provision coverage ratio

Ujjivan Small Finance bank to do portfolio quality & process audit, BFSI News, ET BFSI

Banking & Finance

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About 68 per cent of the Rs 14,000-crore loan portfolio is still in the unsecured microfinance space at Ujjivan, where chief executive Nitin Chugh unexpectedly quit last week, capping off a raft of top-level exits at the lender that went public in 2019.

“We are trying to identify a candidate internally who can manage the day to day operation till Nitin leaves. Carol Furtado is the top candidate,” Ujjivan founder Samit Ghosh told investors on Friday morning.

Ujjivan Small Finance Bank has decided to do an independent portfolio quality & process audit as it is facing stress on asset quality following the disruptions caused by the pandemic.

It will also review its provisioning policy to create an adequate buffer against credit risk.

The holding company of the bank, Ujjivan Financial Services, had earlier expressed concerns over asset classification, bad loan recognition and the ad-hoc bad loan provisioning under chief executive Nitin Chugh, who resigned last week.

The bank on Wednesday appointed Carol Furtado as office on special duty to manage day-to-day operations in the bank till Chugh’s official exit on September 30.

“The bank is undertaking an independent portfolio quality & process audit. We look towards streamlining the provisioning policy. We are confident of strengthening the organisation and emerging as a stronger Ujjivan,” founder of the bank Samit Ghosh said. Ghosh is the common director on the boards of the bank and the holding company.

“With the provision coverage ratio of 75%, the highest in the industry, we are very well positioned,” he added.

After Chugh’s exit, Furtado will be appointed as an interim CEO, subject to regulator’s approval, the company announced Wednesday after its board gave the stamp of approval on the proposal.

The bank also said that it will begin the search for the next full-time CEO and submit two names to the Reserve Bank of India seeking its approval.

In parallel, the bank has also appointed former Andhra Bank chairman BA Prabhakar as its chairman.

ET had highlighted the possibility of both the move immediately after Chugh’s resignation became public.

Furtado, part of the founding team of Ujjivan Financial Services since 2005, will be leading the charge of handling the day-to-day operations from August 26, the company said. Post September 30, she will take charge as the Interim CEO, subject to regulator’s approval.

Ujjivan Financial Services is the holding company for Ujjivan Small Finance Bank, which started its journey in February 2017.

“Carol has been our go to person during any major crisis. I am sure she will lead us out of this Covid crisis with flying colours,” said Ghosh.

Furtado has spearheaded the organisation on numerous occasions, playing critical roles in asset quality management and HR. “Her extensive experience, over a decade and a half, across business, operations, and HR, along with her expertise in leading Ujjivan, through various crises, make her an ideal candidate,” the company said.



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Canara Bank Q1 profit rises nearly three-fold to Rs 1,177 cr, BFSI News, ET BFSI

Banking & Finance

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New Delhi, Jul 27 () Canara Bank on Tuesday reported nearly three-fold jump in standalone net profit at Rs 1,177.47 crore for the quarter ended June 30, helped by reduction in bad loans. The public sector lender had logged a net profit of Rs 406.24 crore in the same quarter of the previous financial year.

During the June quarter last year, Canara Bank had amalgamated Syndicate Bank into itself with effect from April 1, 2020.

Total income in the April-June increased marginally to Rs 21,210.06 crore, from Rs 20,685.91 crore in the year-ago period, Canara Bank said in a regulatory filing.

The bank’s gross non-performing assets (NPAs) declined slightly at 8.50 per cent of the gross advances as on June 30, 2021 as against 8.84 per cent at June-end last year.

Net NPA ratio too fell to 3.46 per cent, from 3.95 per cent in the same quarter a year ago.

As a result, provisions and contingencies for the first quarter came down to Rs 3,728.52 crore as compared to Rs 3,826.34 crore in the year-ago period.

Of this, provisions for NPAs significantly reduced to Rs 2,334.88 crore, as against Rs 3,549.99 crore a year ago.

The Provision Coverage Ratio (PCR) improved to 81.18 per cent as at June 2021, from 78.95 per cent as at June 2020, the bank said in a statement.

Capital adequacy ratio of the bank stood at 13.36 per cent as at June 2021. Out of which Tier-I is 10.34 per cent and Tier-II is 3.02 per cent, it said.

The bank said it plans to raise Rs 9,000 crore through a mix of debt and equity to enhance capital base to fund its business growth during the current fiscal. DP DRR DRR



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Federal Bank records highest ever operating profit, BFSI News, ET BFSI

Banking & Finance

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Federal Bank recently announced the Unaudited Financial Results for the quarter ended 30th June 2021. Its operating profit has grown 21.75% to reach Rs. 1135.18 Cr with net total income growing 15.90% to reach Rs.2068.58 Cr.

Gold loans have registered growth of 53.90% to reach Rs. 15764 Cr and retail advances have grown 15.15% to reach Rs.43599.03 Cr.

Shyam Srinivasan, Managing Director & CEO, Federal Bank said “The external environment continues to be challenging however we have managed to keep our operating momentum intact by delivering our highest ever operating profit, for the quarter. Our CASA ratio is at an all-time high and we continue to build a granular liability franchise with more than 90% of our deposits being retail in nature.”

The total business of the Bank reached Rs. 299158.36 Cr registering Y-o-Y growth of 8.30% as on 30th June 2021. Total Deposits reached Rs. 169393.30 Cr registering Y-o-Y growth of 9.33%. Net advances grew by 6.98% Y-o-Y to reach Rs. 129765.06 Cr as on 30th June 2021.

The total Savings Bank deposit registered a growth of 18.71% to reach Rs. 49018.24 Cr as on 30th June 2021. CASA Deposits of the Bank stood at Rs. 58958.79 Cr registering a Y-o-Y growth of 18.83%. NRE Deposits of the Bank reached Rs. 66018.73 Cr registering a Y-o-Y growth of 9.53% as on 30th June 2021. NRE SB grew to reach Rs. 20010.09 Cr registering a Y-o-Y growth of 14.92%.

The Operating Profit of the Bank as on 30th June 2021 stood at Rs. 1135.18 Cr up from Rs. 932.38 Cr. with total income reaching Rs.4005.86 Cr. Net Profit of the Bank for the quarter ended June 2021 stood at Rs. 367.29 Cr.

“Our relationship with the NR diaspora continues to blossom with our share in personal inward remittances increasing to 18.20%. We have also managed to keep asset quality in check with only a marginal uptick in GNPA and NNPA. Investors believe in our brand and its operational efficiency which was testified by a reputed investor like IFC with their decision to invest in the Bank to the tune of 4.99%” Shyam Srinivasan added.

Net Interest Income grew 9.41% on a Y-o-Y basis from Rs.1296.44 Cr to Rs.1418.43 Cr, other income grew by 33.13% to reach Rs.650.15 Cr, compared to Rs.488.37 Cr as on 30th June 2020. Net total income of the Bank grew 15.90% to reach Rs.2068.58 Cr.

Gross NPA of the Bank as at the end of the quarter stood at Rs. 4649.33 Cr, which as a percentage of Gross Advances comes to 3.50%. Net NPA as on 30th June 2021 stood at Rs.1593.24 Cr, and Net NPA as a percentage of Net Advances is at 1.23%. The Provision Coverage Ratio (including technical write-offs) was strengthened substantially and stood at 78.66%.

The Bank’s Net worth on a Y-o-Y basis increased from Rs.14922.82 Cr to Rs. 16488.53 Cr from 2020 to 2021. The Capital Adequacy Ratio (CRAR) of the Bank, computed as per Basel III guidelines stood at 14.64% as at the end of the quarter. Book Value per share increased to Rs. 82.60 from Rs. 74.85.

Some key ratios include the ROA & ROE of the Bank for the quarter which stood at 0.76% and 9.03% respectively. The Net Interest Margin as on 30th June 2021 stood at 3.15% and cost to income ratio of the Bank has been contained at 45.12% clocking a reduction of 264 bps Y-o-Y. The EPS of the Bank on an annualized basis stands at Rs 7.38.



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Bandhan Bank collections drop in April,asset quality pressure worsens, BFSI News, ET BFSI

Banking & Finance

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The end of Assam and West Bengal polls was expected to end Bandhan Bank worries, but a rise in Covid infections and hike in bad loan provisionings has cast a shadow.

The lender derives a major chunk of its business from the two states.

Collection trends improved to 98% in Mar’21, but declined 3–4% in Apr’21 due to the advent of the second Covid wave, though the drop in collections in West Bengal was less than 3%. Nearly 78% of customers were able to pay some instalments in March 2021 among the NPAs in the MFI portfolio.

The results

The bank missed the fourth-quarter profit estimates by a wide shot due to a jump in bad loans and high provisioning.

It reported an 80% dip in its March quarter net profit at Rs 103 crore, as it wrote off a huge portfolio of loans worth Rs 1,929 crore in the flagship microlending business by recognising stress upfront.

As a result of the accelerated write-off, the bank’s overall provisions shot up to Rs 1,594 crore in the reporting quarter from the year-ago period’s Rs 827 crore. It also made an additional provision of Rs 388 crore on standard advances in the microfinance segment.

Bandhan Bank reported a weak quarter, with net earnings sharply trailing estimates, affected by higher interest reversals of Rs 540 crore. Thus, net interest margins declined 150 bp quarter on quarter while elevated provisions of Rs 1,590 crore further impacted earnings. Total Covid-led provisions for FY21 comprise Rs 1930 crore toward write-offs and another Rs 2,900 crore toward loan loss provisions.

Bad loans

The GNPA ratio improved despite elevated slippages, primarily on account of higher write-offs during the quarter. However, Provision Coverage Ratio fell sharply to 50% (v/s 67% proforma in 3QFY21).

Total loans restructured stood at Rs 620 crore, predominantly in the Housing Finance portfolio, while ‘Nil’ restructuring was seen in the MFI portfolio.

On the business front, AUM grew 8% QoQ, led by strong disbursements in the MFI portfolio. Liability traction was robust at 37% YoY, with the CASA ratio improving 50 bps QoQ.

Management hopeful

Bandhan Bank MD & CEO Chandra Shekhar Ghosh is hopeful that the economy will rebound by the third and fourth quarters of the current fiscal, enabling the lender to meet its targets.

He said the bank had exercised caution amid the COVID-19 pandemic and made additional provisioning in the last quarter of 2020-21.

“We remain cautiously optimistic for the current fiscal as we have made additional provisioning as safeguard. The second wave of Covid pain is expected to subside in the next two-three months, and this time people are better geared than the first wave that took everyone by surprise.

“The worst seems to be over, and the economy will rebound by the time major lending business happens in Q3 and Q4, to meet our targets,” Ghosh said.

Overall, we expect asset quality trends to remain under pressure; thus, we estimate credit cost at 4.0% of loans for FY22, Motilal Oswal Securities said.



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Ind-Ra, BFSI News, ET BFSI

Banking & Finance

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India Ratings and Research (Ind-Ra) has revised its outlook on the overall banking sector to stable for FY22 from negative. This is because substantial systemic measures have reduced the system-wide COVID-19 linked stress below the expected levels. Banks have also strengthened their financials by raising capital and building provision buffers.

“Ind-Ra has upgraded its FY21 credit growth estimates to 6.9% from 1.8% and 8.9% in FY22, with the improvement in the economic environment in 2HFY21 and the government focus on higher spending especially on infrastructure. We estimate GNPA at 8.8% in FY21 (FY22: 10.1%) and stressed assets at 10.9% (11.7%). Provisioning cost has fallen from its earlier estimate of 2.3% for FY21 to 2.1%” said the agency in its report.

Key Findings

Private Sector Banks

  • The regulatory changes led to an improvement in public sector banks’ (PSBs) ability to raise AT I capital, a high provision cover on legacy NPAs, overall systemic support resulting in lower-than-expected COVID-19 stress.
  • Private Banks continue to gain market share both in assets and liabilities, while competing intensely with PSBs. Most have strengthened their capital buffers and proactively managed their portfolio.

Stressed Assets

  • Ind-Ra estimates that about 1.24% of the total bank book is under incremental proforma NPA and about 1.75% of the total book could be restructured by end-FY21.
  • Ind-Ra estimates that overall stressed assets (GNPA + restructured) could increase 30% for the banking system, the increase is almost 1.7x in the retail segment in 2HFY21.
  • The stock of stressed retail assets for PSBs could increase to 2.9% in FY22 from 2.1% in FY21, while it could increase from 1.2% to 4.3% for Pvt Banks.
  • Ind-Ra has assessed that stressed corporate assets as a percentage of gross bank credit declined to 15.3% at end-1HFY21 from 15.7% at end-FY20 (FY19: 17.2%, 1HFY19: 19.3%, FY18: 20.2%).

Provision Coverage Ratio

  • Excluding COVID-19 linked stress, Ind-Ra expects the provision coverage ratio (excluding technical write-offs) for both PSBs and Pvt Banks to reach 75%-80% by end-FY21.
  • The resultant provision cover is expected to be about 70% at end-FY21 and FY22, while the historic slippage rate will continue.
  • PSBs have 0.2%-0.5% provisions while Pvt Banks have 1%-2% covid provisions, most of which is unutilised.

The report further mentioned, “Under the Emergency Credit Line Guarantee Scheme, the GoI provided a guarantee to banks and NBFCs for extending funds to stressed MSMEs. Based on the progress seen till 25 January 2021, the funds sanctioned by banks under the scheme has totalled to INR1.98 trillion.” While Pvt Banks have been more adept at underwriting risk in the segment, they also have a higher share of unsecured retail assets where the borrowers have faced a disproportionate impact on their ability to service loans.

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