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Indian Bank NPA Woes: Q2 FY18 Status Report

The Indian banking NPA woes refuses to go and despite new bankruptcy & insolvency laws, few seems to be convinced that there is a resolution in early sight. We have outlined earlier that the basic fundamental challenge we have is lack of economic growth. With a few industries (aka Telecom) reeling under debt & competition and  few other  (e.g. automotive, manufacturing, IT) feeling pressures & not really kicking up; there are concerns on the job growth & consumer confidence to spend.

We have been tracking the NPA challenge in our Special Series and had earlier highlighted multiple times on the precarious situation especially for PSU banks and especially a few which are on PCA list of RBI. In this short article, we review the Q2 FY18 (Sep 2017) NPA performance to see whether any noticeable improvement is seen.

For the same we collated and charted the FY17, Q1 FY18 and Q2 FY18 Net NPA position of key banks across private & public sector. Key observations:

  1. The NPA problem seems to be stabilizing. By which we mean, that we may not see further significant growth in NPA portfolio but ability to bring it to a more respectable level poses significant challenge unless the economy paces up
  2. There are several PSU banks which have breached PCA threshold of RBI for Asset Quality and continues to remain precarious
  3. There are 3 sets of performers:
    • Gone Worse: Marked with RED star. This set of banks have seen asset quality deteriorating further e.g. United Bank, IDBI, BOM etc. Worrying factor is that several private sector banks e.g. Yes, Axis have shown significant increase from earlier lower levels and this does not augur well as this signifies that the problem is now in whole industry wide.
    • Done Better: A few banks seems to have buckled the trend and have reported better asset quality performance in Q2. This incudes ICICI bank, BOI, CBI, Dena & a few others. They are marked GREEN
    • Status Quo: Most banks seems to have been holding to their FY17 Year end status on NPA. But this is also not an happy scenario as this means that NPA in absolute figures are still increasing and unless economy / industry improves, this situation may be difficult to hold on.

For the interested few, enclosing the similar chart on Gross NPA.

We believe that the NPA issue will remain to be a burning factor for most banks in this fiscal year. There are a few green shoots in economy and the GoI announcement on PSU bank recapitalization have also breathed some life. As of now, it looks that government has to take the lead to revitalize the economy.

Source:

Individual banks quarterly financial reports

SBI FY17 figures not utilized as that was not standalone and not inclusive of associate banks

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