Mumbai: The new corporate debt recast (CDR) norms issued by the Reserve Bank last week will have a massive impact on the profitability of state-run banks - to the tune of 18%- but will promote discipline too, says a report by Standard Chartered Securities.
However, the report says, the impact on private sector banks will be minimal, up to 2% in profit terms.
“If the new CDR guidelines are followed, net profit of state-run banks will likely decline by 6 to 18%. But for private banks, it will be much lower at 0.2 to 2%," the report by Mahrukh Adajania & Rounak Agarwal said on Tuesday.
State-run banks together had a CDR book of ₹ 1,17,100 crore as of FY12, according to the report. In FY12 alone, they added ₹ 62,800 crore in restructured assets.
The new provisions, under which banks will have to provide additional 3% in the first year and 5% in the second year, will see this increasing by ₹ 3,500 crore.
SBI will have to make ₹ 930 crore additional provisioning at 3% incremental coverage, which will bring down EPS growth (FY12) to 34% from 42%.
As of 12 March, SBI had a restructured loan book of ₹ 31,160 crore with the FY12 CDR book totalling ₹ 8,400 crore.
The second biggest victim will be Punjab National Bank, whose provisioning will rise by ₹ 690 crore, but its EPS impact will be minus 1%, from 10%. The Delhi-based lender had a CDR loan book of ₹ 23,060 crore as of FY12; it added ₹ 1,481 crore in FY12 alone.
The worst impact on EPS will be at Oriental Bank of Commerce, which will see EPS erosion at 46% (minus) post-implementation, from existing minus 35%.
The second biggest impact on EPS will be at Canara Bank which will witness erosion to minus 28%, which currently is also down at minus 24%, says the report, adding its provisions will rise Rs240 crore.
Bank of Baroda, the third largest PSB, will see its EPS coming to 2% (from 10%) and its provision will rise ₹ 510 crore. In FY12 its CDR stood at ₹ 885 crore and the cumulative restructured book at ₹ 17,140 crore.
The city-based Bank of India will see its EPS eroding at minus 8% from the current 3% (positive), and will also see its provisions rise by ₹ 30 crore. In FY12 it added ₹ 913 crore in CDR loans taking its overall CDR book to ₹ 14,370 crore.
Another city-based lender, Union Bank, will see its EPS plunging to (minus) 22% from (minus) 14% now, and CDR book will rise to ₹ 240 crore. In FY12 it added ₹ 623 crore in fresh CDR taking CDR outstanding to ₹ 799 crore.
Among the private sector lenders, ICICI Bank will add ₹ 130 crore in CDR under the new provision, and see its EPS whittling down to 22% from 24%. As of FY12 the largest private sector lender added ₹ 374 crore in CDR, taking its restructured asset book to ₹ 426 crore.
Axis Bank will have to set aside ₹ 110 crore in provisions, pulling down its EPS to 22% from ₹ 24%. It added ₹ 133 crore in CDR last fiscal with the cumulative recast loan touching ₹ 383 crore.
HDFC Bank will have minimal impact on provision, which will rise to ₹ 20 crore and will not have any impact on EPS which will continue at 30%. Its total CDR book stood at ₹ 78 crore.
The Reserve Bank last week issued new CDR gudelines following the recommendations of its working group seeking tighter loan recast norms, which include higher contribution from promoters to ensure their full commitment, personal guarantee from the promoter which cannot be replaced with a corporate guarantee, higher provisioning by banks on restructured loans, reducing viability tenors and changes to the recompense clause.
The new guidelines proposes 5% provision on restructured loans up from the current 2-5% in a phased manner over two years.
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