Provisioning for bad debt pushes IOB net down 88%-Business Line
CHENNAI, APRIL 29:
The net profit of Indian Overseas Bank plummeted by 88 per cent to Rs 59 crore for the quarter ended March 31, 2013, against Rs 529 crore in the corresponding quarter last year.
The decline was an outcome of provisioning for bad and doubtful debts and restructured accounts, said Chairman and Managing Director M. Narendra.
Total income was Rs 5,898 crore — a 8.92 per cent increase over the same quarter last year.
For the financial year ending March 31, 2013, net profit was down by nearly half, to Rs 568 crore from Rs 1,050 crore the previous year. Total income was Rs 22,649 crore (Rs 19,578 crore).
HIGHER NPA
The bank’s gross non-performing assets (NPAs), or loans in jeopardy of default at the end of the financial year, increased to Rs 6,607 crore, against Rs 3,920 crore the previous year.
“It was a difficult period. Not many companies came forward to restructure their loans,” Narendra told newspersons.
Narendra said the NPAs of international clients have gone up substantially. “We are going for speedy recovery this year,” he said.
On the domestic front, the NPAs were mainly with small and medium businesses that are going through tough market conditions.
“This year, we should be able to contain the NPA level,” Narendra said.
The bank is cautious on bulk deposits, which have dropped to 11 per cent from 35 per cent. However, core deposits have increased substantially, he said. “This trend is a good sign for the bank and has helped in overall business growth,” he said.
Our Coimbatore Bureau adds: The IOB share price, hovering around Rs 68 for most of the day, took a sharp dive once the results were flashed on the Web sites of stock exchanges just after 3 pm and crashed to a 52-week low of Rs 62.20 on the BSE before pulling back marginally to Rs 63.70 at close.
The stock shed a third of its value in three months after touching a 52-week high of Rs 94.85 on January 7. The bank has cut the dividend payout by half to Rs 2 (Rs 4.50 last year).
Commenting on the results, Vaibhav Agrawal, VP, Banking, Research, Angel Broking, Mumbai, said the bank had reported a “disappointing operating performance” for Q4 of last year.
ASSET QUALITY
He felt that because of the asset quality pressures, provisioning expenses had more than trebled on a y-o-y basis, leading to earnings decline by 89 per cent y-o-y.
He said ‘more clarity from the management’ was being awaited about the asset quality pressure faced during the quarter.
http://www.thehindubusinessline.com/industry-and-economy/banking/provisioning-for-bad-debt-pushes-iob-net-down-88/article4667305.ece
What I Observe:-
I am negative minded but those who are at powerful post either in banks or in government or in RBI are positive minded.This is why person like me foresee or can visualize the hidden bitter truth and maladies in the system but powerful person either do not want to read realities or they wish to willfully and cleverly avoid accepting truth to fulfill their self interest.
I
told many times about inherent weakness of Indian banks, I wrote a few
years ago that volume of Non Performing Assets (including stressed and restructured assets ) in government banks ranges from 5 % to more than
10% of total loans but none of financial experts believed this . RBI deputy governor Mr Chakravorty
accepted almost a year ago that banks are hiding bad loans by using various
unethical tools, ,no effective action was initiated .
Now
Finance Minister has accepted openly the Bitter Truth of Public Sector Banks
and without any hesitation the learned Finance Minister has admitted that PSBs
are overstating profits, making less provision and concealing Volume of Non
Performing Assets to hide their evil deeds and to protect top executives in
banks. Top ranked bank SBI has already declared NPA upto the extent of 4.46% of total advances. Many other banks are in que behind SBI yo follow the same path.
Last year it was also detected that banks did not make even adequate provision towards payment of pension, gratuity and provident fund. Profit of giant bank SBI drastically came down but it did not trigger action against erring bank officials particularly who are ED, CMD, GM , AGM,CM, DGMs and Regional or Circle Heads of various banks who manage and manipulate data as per their whims and fancies to hide their ill works.
If a branch manager is found to involved in window dressing of business he is immediately taken to task provided he does not any Godfather in upper echelon.At the same time it is also a undeniable truth that most of the top executives who are now at the top position have attained such top position only by resorting to window dressing during their posting at various branches as Branch Manager or in a Regional Office as Regional Head or in a Zonal Office as Zonal Head.
In fact Window Dressing is an art to get continuous and fast promotion and also to remain in good books of higher bosses and t be counted as Star Performer. This culture does not change even after one is elevated to the oost of ED or CMD of a bank.
Even when profit of even star performing banks started coming down, government did not take it seriously. What will happen when bitter truth of smaller banks who have not fully adopted CBS till now will surface and precipitate after they adopt technology honestly, fully and perfectly?
Last year it was also detected that banks did not make even adequate provision towards payment of pension, gratuity and provident fund. Profit of giant bank SBI drastically came down but it did not trigger action against erring bank officials particularly who are ED, CMD, GM , AGM,CM, DGMs and Regional or Circle Heads of various banks who manage and manipulate data as per their whims and fancies to hide their ill works.
If a branch manager is found to involved in window dressing of business he is immediately taken to task provided he does not any Godfather in upper echelon.At the same time it is also a undeniable truth that most of the top executives who are now at the top position have attained such top position only by resorting to window dressing during their posting at various branches as Branch Manager or in a Regional Office as Regional Head or in a Zonal Office as Zonal Head.
In fact Window Dressing is an art to get continuous and fast promotion and also to remain in good books of higher bosses and t be counted as Star Performer. This culture does not change even after one is elevated to the oost of ED or CMD of a bank.
Even when profit of even star performing banks started coming down, government did not take it seriously. What will happen when bitter truth of smaller banks who have not fully adopted CBS till now will surface and precipitate after they adopt technology honestly, fully and perfectly?
Politicians
who have used public sector banks for vote banks for decades together are also
silent spectator of loot of banks in the name of credit growth or GDP
growth or Industrial growth of development of agricultural and real estate
sector or to give a boost to automobile sector.
I do not know much economics or much about intricacies of GDP calculation or about side effects of punitive action against top bank executives but I am very much sure that if curative and corrective actions are not taken in time, volume of NPA in banks will go on rising till banks succumbs and collapses under the burden of debt turning bad year after year.
Adequate manpower with best quality, knowledge, experience ,honesty and devoted attitude can only bring about desired change in the system and that too when government machinery supports wholeheartedly in recovery of loan from defaulters.Ill-motivated recruitment from campuses in higher scale,arbitrary rejection of experienced officers in promotion process and whimsical promotion of young flatterers at he cost of dignity of senior staff may only add fuel to fire. Reckless Firing by bosses and building unwarranted and unbearable pressure on juniors may prove counter productive in near future.
Ultimately it is poor investors and depositors who will bear the repercussion of bad performance of top bankers and top politicians and due to non performance of judiciary in proper and time bound framework.
I do not know much economics or much about intricacies of GDP calculation or about side effects of punitive action against top bank executives but I am very much sure that if curative and corrective actions are not taken in time, volume of NPA in banks will go on rising till banks succumbs and collapses under the burden of debt turning bad year after year.
Adequate manpower with best quality, knowledge, experience ,honesty and devoted attitude can only bring about desired change in the system and that too when government machinery supports wholeheartedly in recovery of loan from defaulters.Ill-motivated recruitment from campuses in higher scale,arbitrary rejection of experienced officers in promotion process and whimsical promotion of young flatterers at he cost of dignity of senior staff may only add fuel to fire. Reckless Firing by bosses and building unwarranted and unbearable pressure on juniors may prove counter productive in near future.
Ultimately it is poor investors and depositors who will bear the repercussion of bad performance of top bankers and top politicians and due to non performance of judiciary in proper and time bound framework.
When
A Raja , telecom minister was exposed and when CAG told about loss of 170000
crores of rupees , government told that without A Raja public could not have
enjoyed fruits of revolutionary change in internet and mobile .When Suresh Kalamadi was accused of corrupt deals in Commonwealth Games, PM talked of image of India in International forums.When Madhu Koda and Lalu Yadav was accused of involvement in scam, the then central government started talking of democracy and secularism. And so on.......
Similarly now when bad assets are getting exposed quarter after quarter in banks , top bankers and politicians will talk about GDP growth and credit growth and industrial growth and justify the ill motivated actions and evil deeds of corrupt bankers.
System cannot improve until it learns to award devoted workers and discard flatterers.
Similarly now when bad assets are getting exposed quarter after quarter in banks , top bankers and politicians will talk about GDP growth and credit growth and industrial growth and justify the ill motivated actions and evil deeds of corrupt bankers.
System cannot improve until it learns to award devoted workers and discard flatterers.
FinMin urges PSU banks not to overstate profit
The Finance Ministry has written to all public sector banks asking them to ensure profits are not overstated and to make appropriate provisions for bad loans.
In a letter to heads of public sector banks, the Finance Ministry said “instances of over-reporting of profit have been continuing year after year and no corrective action seems to have been taken to stop the recurrence“.
The letter assumes significance in the light of rising bad debts in the banking sector.
According to a senior official of a public sector bank, the letter has been issued recently by the Finance Ministry.
Sometimes there could be a difference of opinion about the classification of NPA which gets sorted out at the time of external audit or Annual Financial Inspection (AFI) by the Reserve Bank of India (RBI), the official said.
If the bank is unable to convince the RBI for not classifying some loans as NPA and subsequently not making provisions, then the bank has to make provision after AFI, the official said. To that extent the profit is depressed later, the official said.
Banks have been trying to follow prudential guidelines of RBI on NPA in letter and spirit but there could be differences of opinion which gets resolved after AFI and reconciliation of accounts takes place, the official added.
During the third quarter of the current fiscal, banks profitability was hit due to raise in bad loans and restructured loans.
There has been about 19 per cent rise in restructured loan against the previous quarter as textiles, steel and infrastructure companies have suffered due to lower output and higher cost of funds.
Besides, there is NPA pressure for banks from the aviation and power sectors. They are struggling to recover Rs 19,000 crore from the ailing national carrier Air India.
Worried over rising bad loans in certain sectors, RBI is expected to meet banks to take stock of the NPA situation soon.
Finmin asks PSU banks not to overstate profit
The Finance Ministry has written to all public sector banks asking them to ensure profits are not overstated and to make appropriate provisions for bad loans.
In a letter to heads of public sector banks, the Finance Ministry said "instances of over-reporting of profit have been continuing year after year and no corrective action seems to have been taken to stop the recurrence".
The letter assumes significance in the light of rising bad debts in the banking sector.
According to a senior official of a public sector bank, the letter has been issued recently by the Finance Ministry.
Sometimes there could be a difference of opinion about the classification of NPA which gets sorted out at the time of external audit or Annual Financial Inspection (AFI) by the Reserve Bank of India (RBI), the official said.
If the bank is unable to convince the RBI for not classifying some loans as NPA and subsequently not making provisions, then the bank has to make provision after AFI, the official said.
To that extent the profit is depressed later, the official said.
Banks have been trying to follow prudential guidelines of RBI on NPA in letter and spirit but there could be differences of opinion which gets resolved after AFI and reconciliation of accounts takes place, the official added.
During the third quarter of the current fiscal, banks profitability was hit due to jump in bad loans and restructured loans.
There has been about 19 per cent rise in restructured loan against the previous quarter as textiles, steel and infrastructure companies have suffered due to lower output and higher cost of funds.
Besides, there is NPA pressure for banks from the aviation and power sectors. They are struggling to recover Rs 19,000 crore from the ailing national carrier Air India.
Worried over rising bad loans in certain sectors, RBI is expected to meet banks to take stock of the NPA situation soon.
"Stress sectors are well known, the issues which are there. But we don't think there is a great concern as of now," RBI Deputy Governor K C Chakrabarty had said earlier this week.
"But any how we are going to discuss it (NPA issue) with the banks in the coming days. We are going to meet banks during this month or first week of March," he had said.
SOURCE: financialtimes.com
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