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1 1 of 5 5/29/2018, 12:06 PM Deccan Chronicle Andhra Bhoomi Asian Age epaper epaper POWERED BY Search Last Updated:02:39:03 AM Tuesday May 29,2018 Home Politics,Plan & Policy Companies & Markets Brand Around the Globe Miscellany Editorial None of My Business Archives

2 2 of 5 5/29/2018, 12:06 PM Home > Companies And Markets PSBs reel under huge losses in Q4 City: Mumbai Analysts say pain to persist throughout 2018 Public sector banks have reported large losses for the quarter ended March 2018 as bad loans surged and provisions more than doubled after the Reserve Bank of India (RBI) scrapped restructuring schemes on February 12. The latest to report huge loss was Bank of India (BoI) which on Monday registered a net loss of Rs 3,969.2 crore for the fourth quarter compared to Rs 1,045.5 crore in the same period last year. Provisions for bad loans surged by 41 per cent to Rs6,674 crore. Bank of India's loss has taken the total loss posted by the public sector banks that have declared their results so far this quarter to Rs 54,000 crore. BOI s gross non-performing assets as a percentage of total loans stood at per cent at end-march, compared with per cent in the previous quarter and per cent a year ago. The quarter saw public sector banks (PSBs) announcing various methods to conserve capital, like cutting down on corporate loans and overseas business, closing down branches and planning to offload stakes in subsidiaries. Banking experts expect PSBs to continue to report losses this year too as most banks have used the RBI dispensation in spreading the provision for the first list of corporate defaulters under Insolvency and Bankruptcy Code, and spreading Mark to market (MTM) losses. As a result the credit cost will remain high this year and losses will continue. IDBI Bank and Bank of Baroda that announced their earnings on Friday both recorded losses. IDBI Bank s losses widened to Rs 5,663 crore, up 77 per cent from the Rs 3,200 crore loss reported in the quarter ended March 2017, as total provisions increased to Rs 10,544 crore from Rs 5,865 crore a year earlier. IDBI Bank has been selling family silver to improve its capital position and is targeting to raise Rs 3,500 crore to Rs 4,000 crore by offloading stake in its various subsidiaries and joint ventures. The bank has put on block four floors of Mafatlal Centre in Nariman Point in Mumbai which is likely to fetch it Rs 200 crore. It has lined up stake sale in IDBI AMC, IDBI Caps, IDBI Federal Life Insurance and also has plans to offload a 30 per cent stake in National Stock Exchange. Its profit from sale of non-core assets was Rs 3,872 crore for FY2018 as against Rs 517 crore for FY2017. We will focus on five specific areas improving capital adequacy ratio of the bank, improving asset quality, reducing operational cost, sale of non-core assets and improving income earnings. The bank will degrow the corporate business while targeting to grow the retail book by per cent including priority sector loans, housing, MSME loans, said MK Jain, MD and CEO of IDBI Bank. While government capital has come, it has been consumed for provisions. So to grow, PSBs have been constrained in getting capital. They can t ask the government for more capital nor are they in a position to raise equity from non-government sources. So they are generating capital on their own by selling legacy investments or selling stake in subsidiaries, said Karthik Srinivasan, head financial sector ratings at Icra State Bank of India (SBI) declared its results last week. It announced shrinking its corporate loan book and instead growing the retail book to 60 per cent of the total advances. It has a corporate-retail mix of 48:52 wants to bring corporate book down to 40 per cent in the mix. Rajnish Kumar, chairman, SBI, said, "Retail growth will be pushed further while we become cautious on corporate loans. Only investment grade companies and those with a potential for growth will be handpicked for growth." While better rated corporates are able to raise funds from the debt market those with lower ratings, say A or BBB- raise funds from banks where the banks have to set aside more money as the Risk Weighted Assets (RWA) are high. For example, the RWA are 50 per cent for companies with a rating of A while for those rated BBB, banks have to maintain RWA of 100 per cent. Banks are looking at cutting their corporate exposure and focus on retail loans, SME loans, home loans where the RWA are much lower. FY19 will be stretched as banks have used the dispensation on provisions on NCLT accounts and MTM on treasury losses. So these banks need to generate more profits through other means to absorb the provisions in the current year, added Srinivasan. In its March circular, the RBI permitted banks to spread provisioning for mark-to-market losses (depreciation) on investments held in the available for sale (AFS) and held

3 3 of 5 5/29/2018, 12:06 PM for trading (HFT) categories for the quarters ended December 31, 2017, and March 31, The losses can be spread over four quarters, commencing from the quarter in which the loss has been incurred. Most banks have used the dispensation and will have to make remaining provisions in June and September quarter this year. Similarly, the RBI also allowed banks to spread the provision covered in 1st list of corporate defaulters covered under the provisions of IBC. Here too, most banks have availed the option and will have to provide in the current quarter which would impact the Q1 profitability. For the fourth quarter ended March 31, 2018, only two small public sector banks---indian Bank and Vijaya Bank managed to report a profit. The largest quarterly losses have been reported by Punjab National Bank (Rs 13,417 crore), State Bank of India (Rs 7,718 crore). Bank of Baroda posted net loss of Rs 3,102 crore due to higher credit loss provisions compared to Rs 155 crore net profit during the corresponding quarter of the previous year. The numbers were disappointing despite most banks taking some reprieve through tax write-backs which helped reduces losses to some extent. While banks have been recognising and providing for bad loans since 2015, the process was speeded up due to a tougher stressed asset framework put in place by the Reserve Bank of India in February. The RBI in February scrapped six stressed non-performing asset (NPA) restructuring schemes such as Corporate Debt Restructuring, Strategic Debt Restructuring (SDR), Scheme for Sustainable Structuring of Stressed Assets (S4A) and Framework for Revitalizing Distressed Assets, Joint Lenders Forum and the 5/25 loan scheme, among others. According to Care Ratings study of 26 public and private banks that have announced their results, the total provisions made during the year (of which the most would be for NPAs) increased from Rs 43,611 crore to Rs 105,150 crore - an increase of 141 per cent. Columnist: Falaknaaz Syed MORE FROM COMPANIES AND MARKETS Keep watch on global developments The market started off on a positive note, with the Sensex gaining for third consecutive day on the back of sharp fall in crude oil prices and strengthening rupee. SpiceJet hits upper circuit, oil marketing firms gain by 4-6% Stocks of fuel oil marketing companies and airlines rallied as crude prices fell for three consecutive days in the international markets and the rupee recovered from recent lows. Deloitte Haskins quits as Manpasand auditor, says firm failed to provide info Auditing major Deloitte Haskins & Sells resigned as statutory auditors of Manpasand Beverages as the fruit juice maker failed to provide them with "significant information" on the financial res reply has revealed. 21 PSBs lost Rs 25,775 crore to frauds in FY18 Twenty-one public sector banks have lost a total of Rs 25,775 crore due to banking frauds in , a Right to Information (RTI) EDITORIAL OF THE DAY D for dabba Box trading is a menance that needs immediate attention More.. -- Previous Editorials

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