Q1FY18 Results: Asset quality of banks under dark clouds

Q1FY18 results season has kicked off, with private sector banks posting stable quarterly results. 

Four private banks have posted their latest quarterly results over the last 15 days, including Indusind Bank, South Indian Bank, DCB Bank and Karnataka Bank.

Looking at the latest results, revenue flow for the banks remained strong, with interest earned rising in the range of 15% to 20% YoY in Q1FY18. Further, lower interest expended due to high CASA share benefited the banks in increasing their NIIs (net interest incomes) in Q1FY18.  The NIIs for four banks have seen a growth of 15% to 30% YoY.

However, rising GNPAs remain a cause of concern for the entire banking system. Indusind Bank, DCB Bank and Karnataka Bank posted sharp rise in their gross NPAs for the quarter, whereas South Indian Bank saw a marginal rise in GNPAs for the quarter, thereby improving its asset quality.

Lastly, bottomline showed stable performance due to elevated provisions against non-performing assets. Indusind Bank and DCB Bank posted more than 30% rise in their net profits, while South Indian Bank and Karnataka Bank posted slower growth at 6% and 10%, respectively. This was largely due to steep rise in provisions.

Banks continue to emphasize on improving asset quality and also maintain enough capital adequacy for further growth. Indusind Bank, Karnataka Bank, DCB Bank and South Indian Bank were trading flat at 14:15 pm today.