Indian Bank Q2 net profit more than doubles

Indian Bank on Wednesday said its second quarter net profit more than doubled on higher other income and a decline in provisioning.

The bank posted a net profit of ₹358.56 crore for the three months ended 30 September compared with ₹150.14 crore in the year-ago period.

Profit was higher than the Bloomberg poll of five analysts, which had estimated a loss of ₹328.10 crore.

Other income, which includes core fee income, rose 72.22% to ₹737.65 crore in the three months from ₹428.32 crore a year ago.

Provisions during the quarter decreased 9.46% to ₹909.37 crore as against ₹1004.34 crore in the year-ago quarter. In Apr-Jun, the bank had set aside ₹794.82 crore in provisions.

Net interest income, or the difference between interest earned on loans and that paid on deposits, increased 7.63% to ₹1863.04 crore from ₹1730.93 crore in the corresponding period last year.

Gross non-performing assets (NPA), as a percentage of total advances, were at 7.2% in the September quarter compared with 7.33% in the June quarter and 7.16% in the year-ago quarter.

Post provision, the net NPA ratio was at 3.54% against 3.84% in the Apr-Jun quarter and 4.23% in the year-ago quarter.

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Indian bank Q1 result, net profit up 74%

Indian Bank on Monday posted a 74.55 per cent jump in its net profits for the April-June quarter. According to a top official, it recorded a net profit of Rs 365.37 crore.

Indian bank recorded net profits at Rs 209.31 crore during the corresponding quarter the previous year.

For the year ending March 31, 2019 the net profits were at Rs 321.95 crore.

Declaring the financial performance, Indian Bank managing director and Chief Executive Officer (CEO) Padmaja Chunduru said it is one quarter posting strong results.

“The bank has posted a healthy growth in all segments,” she told reporters.

On the total income for the April-June quarter, she said it grew to Rs 5,832.11 crore from Rs 5,131.96 crore registered the same period last year.

For the year ending March 31, 2019 total income of the bank was at Rs 21,067.70 crore.

On the 74.55 per cent jump in the net profits, Chunduru said they have been the highest strong point of this quarter.

“There is a 75 per cent increase (in net profits). This is because of arrest in fresh slippages, increase in recovery.

I think, we are back on track. We have been working on arresting fresh slippages,” she said.

According to her, the slippages were Rs 1,035 crore for the quarter under review period.

She said the bank has set a target of bringing down the slippages to around Rs 800-Rs 900 crore in the coming quarters.

“There is growth in RAM (retail, agriculture and micro, small and medium enterprises segments) with 25 per cent in retail, 25 per cent in agriculture and 10 per cent in micro, small and medium enterprises (MSMEs).

The overall capital adequacy ratio is at 13.62 per cent. This is what gives us more comfort and confidence. We are building assets in a very prudent way”, she said.

Noting that the bank witnessed over 300 per cent rise in transactions made through mobile banking, she said the bank planned to ramp up transactions made through the digital platform.

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Five PSU banks have over 70% NPA from industry in FY19

The non-performing assets (NPAs) in the industry sector accounted for over 50 per cent of the total bad debts in 18 of the 20 state-run banks in 2018-19, indicating the massive concentration risk still facing the banking sector.

Five state-run banks reported that bad debts from industry contributed more than 70 per cent of their total NPAs, according to Reserve Bank of India (RBI) data presented by the Finance Ministry to the Lok Sabha Monday.

Alarmingly, of these five banks, four are relatively smaller ones.

Andhra Bank had the highest share of industry bad debts at 86 per cent, followed by United Bank of India (UBI) at 78 per cent and Indian Bank at 74 per cent.

The country’s largest bank, State Bank of India (SBI) had 73 per cent of its bad debts from the industry sector, followed by Allahabad Bank at 70 per cent.

Only two banks saw the share of industry NPAs at less than 50 per cent — Syndicate Bank and Bank of India at 36 per cent and 49 per cent, respectively.

Industry issue

Basic metals and metal products, gems and jewellery, engineering, vehicles, construction and textiles have been the major groups within industry seeing high levels of stress, RBI had pointed out in its December 2018 report of trends and progress in banking in India.

In 2017-18, even though industry received 37.3 per cent of total loans and advances by all the banks, it contributed to about three-fourth of the total NPAs.

However, with resolution under the Insolvency and Bankruptcy Code (IBC) picking up pace in 2018-19, industry NPAs have been coming down and banks have been making better recoveries.

The gross NPAs of state-run banks as of March 2019 was at Rs 8.06 lakh crore, as against Rs 8.95 lakh crore in the year-ago period.

Steps taken to resolve bad debts

The Modi government has announced many steps over the last few years to tackle the burgeoning bad debt problem. These include enactment of the IBC, amendments to the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, staffing the debt recovery tribunals, and asking banks to crack down on defaulters.

However, despite all these steps, resolution of bad debts has been a slow process, forcing the Modi government to go in for a massive bank capitalisation drive to ensure that state-run banks do not breach any regulatory capital requirements.

The government has also accelerated the bank consolidation drive by merging a big banks with smaller, lesser-performing ones to create a large competitive entity. The government merged State Bank of India with its associate banks and followed it with the merger of Bank of Baroda, Vijaya Bank and Dena Bank.

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Indian Bank opposes merger with OBC, says has well-laid out plan for 3 years

Oriental Bank of Commerce (OBC) may have floated the idea of a merger of two other state-run lenders – Indian Bank and Corporation Bank – into itself, but the Chennai-based bank doesn't seem to be interested. In a statement on Wednesday, Indian Bank said its board doesn't have any such proposal, showing its intent against any such potential merger into OBC should the government ask for its view. “There is no such proposal with the board of the bank,” it said. “The bank has a well-laid out business plan for the next three years, with a clear visibility on growth, earnings and asset quality that create significant value for all its stakeholders.”

Banking sources had told FE that OBC had sought the finance ministry's approval to combine with Indian Bank and Corporation Bank. The ministry would consider OBC's proposal and take a view soon, one of the sources had said.

OBC – which was facing restrictions under the central bank's Prompt Corrective Action (PCA) framework until early February – recorded a net profit of Rs 201.5 crore in the March quarter, compared with a net loss of Rs 1,650.22 crore a year earlier. Even sequentially, the profit surged 39%.

However, Corporation Bank's losses zoomed to Rs 6,581.49 crore during the fourth quarter of FY19, against Rs 1,838.39 crore a year before. Indian Bank saw a net loss of Rs 190 crore in the March quarter, against a net profit of Rs 132 crore in the same period last year.

While the headquarters of OBC is in Gurugram, those of Corporation Bank and Indian Bank are in Mangalore and Chennai, respectively.

Indian Bank's net NPA ratio was the lowest of the three – 3.75%, against OBC's 5.93% and Corporation Bank's 5.71%. At 11.29%, Indian Bank's tier-i capital was higher than OBC's 9.98% and Corporation Bank's 10.52%.

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Big bank theory: This two PSU Banks may merge into Oriental Banks of Commerce (OBC)

With a heavy mandate to push reforms, the BJP-led government may soon kick-start the next phase of consolidation in the public-sector banking space with an amalgamation of three lenders — Oriental Bank of Commerce (OBC), Indian Bank and Corporation Bank.

Banking sources told FE that OBC has sought the finance ministry’s approval to combine with Indian Bank and Corporation Bank. The ministry will consider OBC’s proposal and take a view soon, one of the sources said. However, there is no formal announcement from the finance ministry on the matter yet. Another source said the government may infuse `40,000-50,000 crore into public-sector banks (PSBs) this fiscal, having already provided `1,06,000 crore in FY19.

The merger, if implemented, will be part of the government's efforts to create a few but strong banks with much larger balance sheet to support the rising credit appetite of the fast-growing economy and enable optimum utilisation of resources.

The successful experience of merging State Bank of India with five of its subsidiaries and Bharatiya Mahila Bank, and the amalgamation of Bank of Baroda, Vijaya Bank and Dena bank have given the government confidence that more such consolidation exercises can be handled without any hiccups.

OBC — which was facing restrictions under the central bank's Prompt Corrective Action (PCA) framework until early February —recorded a net profit of Rs 201.5 crore in the March quarter from a net loss of Rs 1,650.22 crore a year earlier. Even sequentially, the profit surged 39%. However, Corporation Bank's losses zoomed to Rs 6,581.49 crore during the fourth quarter of FY19, against Rs 1,838.39 crore a year before.

Indian Bank saw a net loss of Rs 190 crore in the March quarter, against a net profit of Rs 132 crore in the same period last year. While the headquarters of OBC is in Gurugram, those of Corporation Bank and Indian Bank are in Mangalore and Chennai, respectively.

Earlier, there were reports of Punjab National Bank (PNB) amalgamating with OBC and some other smaller banks, such as Punjab & Sind Bank, Allahabad Bank and Andhra Bank. However, given that PNB is still not out of the woods, any such plan may wait until the bank's results for the first quarter of this fiscal are out. PNB recorded losses of Rs 4,750 crore in the March quarter, against a net loss of Rs 13,417 crore in the same quarter last fiscal when the Nirav Modi fraud came to light. It, however, had recorded a net profit of Rs 247 crore in the third quarter of FY19.

Upon amalgamation, the merged entity will have a combined deposits of `6.6 lakh crore and advances of Rs 4.8 lakh crore, said the sources. The net NPA ratio of OBC stood at 5.93%, while that of Corporation Bank and Indian Bank was 5.71% and 3.75%, respectively at the end of March.

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Indian Bank Q4 result, posts net loss

State-owned Indian Bank reported a net loss of Rs 189.77 crore in the fourth quarter of the financial year ended March 2019, as high level of bad loans required substantial amount to be kept as provisioning parking.

The bank had registered a net profit of Rs 131.98 crore during the similar January-March quarter of 2017-18.

Its total income in the March 2019 quarter, however, was up at Rs 5,537.47 crore as against Rs 4,954.21 crore in the corresponding period a year-ago, the bank said in a regulatory filing. For the full year, the bank’s net profit was Rs 320.93 crore on a consolidated basis, as against Rs 1,262.92 crore in 2017-18. Total income was Rs 21,073.50 crore in 2018-19, up from Rs 19,531.91 crore a year ago.

On the bank’s asset quality, the gross non-performing assets (NPAs) or bad loans reduced to 7.11 per cent of the gross advances by the end of March 2019, as against 7.37 per cent at the end of March 2018. Net NPAs came down to 3.75 per cent as against 3.81 per cent.

NPA provisioning up

The overall provisioning and contingencies for the March 2019 quarter were at Rs 1,638.83 crore, higher than Rs 1,546.34 crore a year ago. Of this, the provisioning for bad loans was Rs 1,432.94 crore, as against Rs 1,772.03 crore in the year-ago quarter.

During the year ended March 31, the bank recovered Rs 585.84 crore in one of the accounts by way of the NCLT settlement, it said.

For the provisions of the Insolvency and Bankruptcy Code, the bank is holding a total provision of Rs 83.07 crore as on March 31, 2019, Indian Bank said. Non-performing loan provision coverage ratio is 65.72 per cent as on March 31, 2019.

On the divergence in asset classification and provisioning for NPAs for 2017-18, Indian Bank has showed a gap of Rs 178.50 crore in gross NPAs; Rs 41.40 crore in divergence in net NPAs and the divergence in provisioning stood at Rs 1,120.90 crore.

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Two Regional Rural banks going to amalgamate

Indian Bank, on Friday, said the Department of Financial Services, Ministry of Finance, has issued a notification for amalgamation of Pallavan Grama Bank (sponsored by Indian Bank) and Pandyan Grama Bank (sponsored by Indian Overseas Bank) in Tamil Nadu into a single Regional Rural Bank.

The new bank will be called Tamil Nadu Grama Bank, with its head office at Salem, under \the sponsorship of Indian Bank.

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Indian Bank Q3 result, profit halves

Indian Bank’s Q3 net profit fell by 50% to Rs.152 crore as on December 2018, against Rs.303 crore recorded in the same period last year, mainly on account of higher provisioning towards bad loans.

“The main factor for decline in profit is due to additional non-performing assets (NPAs) added during this quarter due to our exposure to Infrastructure Leasing & Financial Services (IL&FS),” said Padmaja Chunduru, Managing Director, Indian Bank.

Of the total provision of Rs.973 crore made during the quarter, provision on loans to IL&FS alone accounted for about Rs.664 crore. Chunduru said the bank is hopeful that the entire Rs.664 crore classified as NPA will not become ‘non-performing’, as the government and Reserve Bank of India are working on a resolution process.

The asset quality of the bank further deteriorated with the increase in Gross NPA to 7.46 per cent (6.27 per cent) and net NPA rose to 4.42 per cent (3.30 per cent) on a year-on-year basis.

Fresh slippages for the quarter ended December 2018 stood at Rs.1,769 crore against Rs.903 crore a year earlier, while for the September quarter it was Rs.1,624 crore.

Total income of the bank grew 7.47 per cent to Rs.5,269 crore (Rs.4,903 crore) as on December 2018. Net interest income saw a growth of 5.8 per cent to Rs.1,717 crore (Rs.1,623 crore), while net interest margin improved to 2.88 per cent (2.85 per cent) in Q3 FY19.

“We will increase the number of current account and savings account (CASA) and realign fixed deposits (FDs) to bring down our cost of funding,” said Chunduru.

Indian Bank’s CASA grew 6.85 per cent to Rs.78,890 crore (Rs.73,835 crore) for the December 2018 quarter, while global deposits stood at Rs.2,25,847 crore(Rs.2,06,533 crore).

The banks’ global business crossed the Rs.4 lakh crore milestone for the first time to reach Rs.4,02,711 crore, registering a annual growth of 11.97 per cent.

“Our top priority now is to avoid fresh slippages and focus on recovery,” said Chunduru.

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