Assets quality being improved by some industry leaders to lift future bank profits.
Key players SBI, ICICI AND AXIS Bank, has improved loan quality significantly by reducing the non-performing assets.
Subdued March quarter earnings at most Indian lenders contradict the probability of accelerating profit growth in the future, with the industry's most recent bottom-line performances masking slower addition to toxic assets and higher possible recoveries of loans currently labeled doubtful. The key players in the banking sector SBI, ICICI and Axis bank has significantly improved their loan quality by reducing its non- performing asset (NPA), Whereas the demand from corporate and retail results in an expansion in credit growth. SBI, holding the most extensive loan portfolio, saw a fall up to 7.45 % in its gross non-performing asset (GNPA) against 11% on the year. The GNPA ratios of ICICI Bank and Axis Bank also fell up to 241 bps and 151 bps, respectively.
Previously, banks faced unappealing anticipation of seeing corporate exposure that eventually turned out as bad loans, and such an event put a question mark on the profitability of the entire sector.
The pressure on banks increased, when the default in last autumn by IL&FS happened, this result in creating more bad loans of RS 90,000 in subsequent quarters.
However, banks stopped provisioning such loans. SBI bank, AXIS bank, and ICICI bank to strengthen their balance sheet and safeguard themselves against long term NPAs reporting their all-time provision coverage ratios in the March quarter.
"Competition intensity for a lot of banks has decreased, with tight liquidity causing NBFCs to slow down. Banks are finding it easier to increase their retail credit market share, especially in SME and Agri portfolios traditionally dominated by NBFCs" said Lalitabh Shrivastawa, AVP research, Sharekhan. Analysts also say that to boost investor’s confidence, better provisions and expected recoveries from multiple accounts should be improved.