Banking Sector – Q3FY21 – Clear strength seen in large banks vs mid & small banks

Updated : February 15, 2021 03:48 PM IST

Q3FY21 was the first quarter post lockdown with respect to recognition of stress in the form of restructured assets or proforma (without Supreme Court dispensation) asset quality. The large banks not only showed how smart they were in raising money in Q2; but they also showed a comparatively better performance when compared to mid and small banks. Retail and SME were the painful sectors for banks in Q3, while corporate stress is now behind for the banking sector.

17 banks data showed Emergency Credit Line Guarantee Scheme (ECLGS) advances of Rs 85,225 crore, forming 1.8 percent of loan book. 29 banks data showed Rs 58,704 crore of COVID-19 provisions, at 1.03 percent of loans. 19 banks data showed an average restructuring of 1.59 percent of loans.

Given below is the Gross Non-Performing Asset (GNPA) levels of banks based on with Supreme Court dispensation and without apex court dispensation. The highest deterioration or the NPAs from standstill accounts was for Bandhan Bank followed by Ujjivan, IDFC First Bank and RBL Bank. The lowest impact was for HDFC Bank, Federal Bank and SBI. For SBI, in fact, the proforma asset quality improved quarter-on-quarter.

GNPA, %	Proforma*	Reported#
Axis Bank	4.55	3.44
Bandhan Bank	7.12	1.11
Bank of Baroda	9.63	8.48
Bank of India	14.59	13.25
Canara Bank	8.95	7.46
Central Bank of India	18.19	16.30
DCB Bank	3.70	1.96
Equitas Holdings	4.16	2.27
Federal bank	3.38	2.71
HDFC Bank	1.38	0.81
ICICI Bank	5.42	4.38
IDBI Bank	24.33	23.52
IDFC First Bank	4.18	1.33
Indian Bank	10.38	9.04
IndusInd Bank	2.93	1.74
IOB	13.07	12.19
Karur Vysya Bank	9.07	7.37
Kotak Mah Bank	3.27	2.26
PNB	14.71	12.99
RBL Bank	4.57	1.84
SBI	5.44	4.77
Ujjivan	4.83	0.96
Union Bank of India	15.28	13.49

*Without SC dispensation

#With SC dispensation

Key alert: SC has stayed on NPA recognition from loans which couldn’t repay their dues between March 2020 to August 2020.

Under Aatmanirbhar Bharat, government has launched a scheme called ECLGS. Eligible borrowers or entities could borrow an additional 20 percent of funded or non-funded or both as collateral-free loan guaranteed emergency credit line, which would be fully guaranteed by National Credit Guarantee Trustee Co. Ltd (NCGTC). ECLGS data showed the highest loans given by City Union Bank and Kotak Mahindra Bank in percentage terms. But value-wise, it’s the highest for SBI and HDFC Bank.

	ECLGS
Banks	% of book	Rs cr
Ujjivan	0.40	55
Indian Bank	0.52	2,013
State Bank of India	0.94	23,000
Bank of India	1.30	4,800
IndusInd Bank	1.35	2,800
Canara Bank	1.42	9,479
Axis Bank	1.52	8,875
PNB	1.67	11,000
AU Small Finance Bank	1.68	557
ICICI Bank	1.80	12,600
YES Bank	1.89	3,200
Federal bank	2.07	2,600
HDFC Bank	2.09	22,600
Karnataka Bank	3.60	1,916
Karur Vysya Bank	3.84	2,000
Kotak Mah Bank	4.53	9,700
City Union Bank	5.32	1,911

Bankers had started making provisions on standstill accounts under COVID-19 on loans which had not paid due to RBI guidelines of making 10 percent provisions on those outstanding amounts. COVID-19 provision is the highest by amount for ICICI Bank and HDFC Bank. AS percentage of loans, it’s the highest for Ujjivan followed by Bandhan Bank.

Banks	% of book	Rs cr
Bank of Baroda	0.24	1,709
State Bank of India	0.25	6,247
Karur Vysya Bank	0.26	137
Karnataka Bank	0.28	148
Canara Bank	0.28	1,901
Bank of India	0.29	1,066
Central Bank of India	0.33	519
UCO Bank	0.33	355
Equitas Holdings	0.33	57
Indian Bank	0.39	1,517
Federal bank	0.43	536
South Indian Bank	0.44	276
PNB	0.46	3,041
Kotak Mah Bank	0.60	1,279
IOB	0.74	924
HDFC Bank	0.80	8,656
J&K Bank	0.83	555
Axis Bank	0.86	5,012
DCB Bank	0.91	229
IDBI Bank	0.92	1,145
CSB Bank	1.10	145
City Union Bank	1.29	465
ICICI Bank	1.43	9,984
IndusInd Bank	1.57	3,261
YES Bank	1.58	2,683
IDFC Bank	1.96	2,165
Punjab & Sind Bank	2.07	1,198
Bandhan Bank	3.41	2,740
Ujjivan	5.52	753

The RBI has allowed banks to restructure loans for COVID-19 related stress. The scheme allows banks to restructure loans which were regular in their repayments and don’t have more than 30d days overdue as of March 1, 2020. Thus, banks would not downgrade the asset classification to an NPA. COVID-19 impacted, one-time restructuring (OTR), is the highest for Ujjivan followed by YES Bank.

Banks	Restructuring, % of book
Kotak Mah Bank	0.28
ICICI Bank	0.36
Axis Bank	0.46
HDFC Bank	0.50
IndusInd Bank	0.55
State Bank of India	0.74
AU Small Finance Bank	0.76
IDFC Bank	0.80
Federal bank	0.85
Karnataka Bank	1.30
Bank of Baroda	1.36
Bank of India	1.63
Indian Bank	1.64
Central Bank of India	1.74
PNB	1.82
Equitas Holdings	1.97
Canara Bank	2.44
YES Bank	4.75
Ujjivan	6.25

Conclusion

While large banks have been able to successfully come out of COVID-19 stress with minor hiccups on restructuring and NPA front vs the expectations, stress for mid and small banks stands elevated.

Large banks are also taking away market share due to strong capitalization while mid and small banks are trying to protect their balance sheet from the rise in stressed assets which is seen and expected by Q4FY21.

Quarterly trend data for reference

Net profit / (Loss)	PSU Banks (Rs cr)	Pvt Banks (Rs cr)	Total (Rs cr)
Q3FY21	7,766	19,749	27,515
Q2FY21	9,165	18,685	27,850
Q1FY21	5,991	14,121	20,112
Q4FY20	(5,973)	5,457	(516)
Q3FY20	(8,474)	16,460	7,986
Q2FY20	(4,186)	11,399	7,213
Q1FY20	123	13,298	13,421
Q4FY19	(30,905)	10,375	(20,530)
Q3FY19	(11,598)	11,961	363
Q2FY19	(14,716)	10,559	(4,157)
Q1FY19	(16,622)	10,119	(6,503)
Q4FY18	(62,681)	7,597	(55,085)
Q3FY18	(18,107)	11,533	(6,575)
Q2FY18	(1,208)	10,699	9,491
Q1FY18	(307)	12,000	11,693
Q4FY17	(10,008)	10,991	983
Q3FY17	598	10,738	11,336
Q2FY17	3,411	10,066	13,477
Q1FY17	238	11,038	11,276
Q4FY16	(18,355)	8,971	(9,384)
Q3FY16	(10,796)	11,633	837

PSU banks have lost market share of 1070 bps in last 21 quarters

Loan Book Mkt Share (%)	PSU Banks	Pvt Banks
Q3FY21	63.9	36.1
Q2FY21	64.1	35.9
Q1FY21	65.9	34.1
Q4FY20	66.0	34.0
Q3FY20	65.4	34.6
Q2FY20	64.2	35.8
Q1FY20	66.3	33.7
Q4FY19	65.1	34.9
Q3FY19	65.6	34.4
Q2FY19	66.6	33.4
Q1FY19	67.7	32.3
Q4FY18	69.1	30.9
Q3FY18	69.4	30.6
Q2FY18	70.2	29.8
Q1FY18	71.3	28.7
Q4FY17	72.2	27.8
Q3FY17	73.4	26.6
Q2FY17	73.0	27.0
Q1FY17	74.7	25.3
Q4FY16	74.7	25.3
Q3FY16	74.6	25.4

GNPA	PSU Banks	Pvt Banks
Q3FY21	9.4	3.5
Q2FY21	10.2	4.2
Q1FY21	10.6	4.6
Q4FY20	10.6	4.5
Q3FY20	12.6	4.0
Q2FY20	13.0	4.1
Q1FY20	12.9	4.3
Q4FY19	13.0	4.2
Q3FY19	14.2	4.5
Q2FY19	14.9	4.5
Q1FY19	15.3	4.7
Q4FY18	15.6	7.9
Q3FY18	13.8	4.3
Q2FY18	13.2	4.5
Q1FY18	13.1	4.3
Q4FY17	10.9	4.2
Q3FY17	11.6	4.3
Q2FY17	10.5	3.7
Q1FY17	10.0	3.2
Q4FY16	9.2	2.9
Q3FY16	7.4	2.8

NNPA	PSU Banks	Pvt Banks
Q3FY21	2.3	0.7
Q2FY21	2.8	1.0
Q1FY21	3.3	1.3
Q4FY20	3.5	1.4
Q3FY20	4.6	1.5
Q2FY20	4.8	1.5
Q1FY20	4.9	1.6
Q4FY19*	4.9	1.6
Q3FY19	6.3	1.7
Q2FY19	7.0	1.9
Q1FY19	7.5	2.2
Q4FY18	7.9	2.4
Q3FY18	7.4	5.7
Q2FY18	7.1	2.3
Q1FY18	7.4	2.2
Q4FY17	6.0	2.1
Q3FY17	6.7	2.0
Q2FY17	6.2	1.8
Q1FY17	5.8	1.6
Q4FY16	5.5	1.4
Q3FY16	4.4	1.1