Mumbai: Nearly Rs 7,000 crore of fourth quarter losses reported by six public sector banks on Friday showed that the bad loan problem for banks is far from over. The biggest surprise was the Rs 3230 crore loss reported by Bank of Baroda – the second largest public sector bank in terms of assets. Union Bank of India was the only bank which made a profit of Rs 97 crore in the fourth quarter was the only PSU bank to avoid a loss today. All other lenders Central Bank, UCO Bank, Allahabad Bank and Dena Bank reported losses.
For bank stocks, bad news came in twos. The higher-than-expected inflation numbers dashed hopes of any further rate cut by the Reserve Bank of India and the worse-than-expected results dragged down share prices even further. The BSE bankex was down 1.25% with Punjab National Bank, Kotak Mahindra, ICICI Bank and State Bank of India being among the top losers among banks.
Bank of Baroda’s results surprised markets as the management had made huge provisions in the third quarter stating that it has set aside the full amount required in respect of accounts identified by the Reserve Bank of India as a non-performing asset. The bank said that its gross non-performing assets (bad loans) rose to 9.99% of its total loans.
Meanwhile Kolkata-based UCO Bank reported a fourth quarter loss of Rs 1715 crore. The banks gross NPA rose to 15.43% in March from 10.98% at the end of the third quarter. In absolute terms the bank’s gross non-performing assets surged to Rs 40,521 crore.
Allahabad Bank, which had reported a surprise loss of Rs 486 crore in the third quarter following Rs 1208 crore of provisions, took a fresh hit of provisions amounting to Rs 2,487 crore in the fourth quarter. The bank reported a loss of Rs 581 crore in the fourth quarter of FY16 a drop of 387% over the corresponding period last year. Its third quarter provisions were almost three times the provisions of Rs 631 crore in the corresponding quarter last year.
Union Bank was the only bank which surprised on the upside with a 22% increase in net profit for the fourth quarter. Even though the bank reported an increase in NPA provisions and in the stock of bad loans, the bank’s operating profits declined lower-than expected. Kolkata-based UCO Bank reported a net loss of Rs 1715 crore following a surge in provisions for bad loans. The bank had reported a net profit of Rs 209 crore in the year-ago quarter. Its gross bad loans as a percentage of total loans increased to 15.43 percent in March from 10.98 percent as of December.