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Mumbai: Bad loan woes for banks continued on Wednesday, with three of the five banks that reported quarterly earnings on the day mentioning a deterioration in asset quality.

Uco Bank, the biggest of the three, reported a dismal performance in the fiscal second quarter although accumulation of its gross non-performing assets (NPAs) saw a slight drop. Its gross NPA stood at 16.51% at the end of the September quarter, compared with 17.19% a quarter ago.

Three banks reported a worsening of asset quality: Oriental Bank of Commerce’s gross NPA increased to 12.36% at the end of fiscal second quarter, compared with 11.45% a quarter ago. Indian Bank saw its gross NPA jumping to 7.28%, compared with 6.97% in the June quarter, while Punjab and Sind Bank’s gross NPA increased to 8.63% for the second quarter against 7.23% in June.

Karnataka Bank’s gross NPA decreased to 3.64% at the end of September quarter compared to 3.92% a quarter ago.

In December, the Reserve Bank of India (RBI) conducted an asset quality review across the banking sector, following which banks were asked to recognize visibly stressed assets as NPAs.

RBI also asked banks to make adequate provisions for stressed assets. This has hit the profitability of some banks.

Provisions for all the five banks increased by a substantial amount from last year. Oriental Bank’s provision increased to Rs774.54 crore for the second quarter, compared with Rs569.42 crore a year ago. Indian Bank’s provision more than doubled to Rs478.27 crore.

Punjab and Sind Bank’s provision almost doubled to Rs225.46 crore for the September quarter. Karnataka Bank’s provision increased to Rs130.55 crore in the second quarter, compared with Rs35.07 crore in the year earlier. Uco Bank saw its provision increase by close to 40% to Rs1,488.34 crore for the September quarter.

Provision coverage ratio for Oriental Bank of Commerce, Indian bank, Punjab and Sind Bank and Uco Bank stood at 48.47%, 55.11%, 46.01% and 58.29%, respectively, at the end of the September quarter.

Net profits of both Oriental Bank of Commerce and Punjab and Sind Bank halved. Oriental Bank of Commerce’s net profit declined to Rs153.27 crore in the September quarter, compared to Rs301.31 crore in the year-ago period.

Indian Bank and Karnataka Bank managed to increase their profits on the back of higher net interest income. Indian Bank net profit increased 16% to Rs405.13 crore for the second quarter against Rs341.92 crore a year ago. Karnataka Bank saw a slight increase in net profits to Rs123.82 crore against Rs102.25 crore a year ago, capturing growth of 17%.

Net interest income (NII), or the difference between interest earned on loans and that spent on deposits, declined for all except Indian Bank and Karnataka Bank. At both Uco Bank and Punjab and Sind Bank NII declined by more than 10% to Rs1,246.27 crore and Rs518.53 crore, respectively, for the September quarter. Oriental Bank NII declined 5% to Rs1,315.63 crore at the end of the second quarter.

Karnataka Bank saw a 23% jump in NII to Rs397.25 crore while Indian Bank earned Rs1,278.25 crore through NII for the September ended quarter.

Except Uco Bank, all other banks reported their results during market hours.

Indian Bank gained 7.05% to Rs230.85 on Wednesday on BSE, while the benchmark Sensex lost 1.23% to close at 27,252.53 points and the banking index, Bankex, gained 0.18% to close at 22374.20 points. UCO Bank lost 0.6% to close at Rs33.25 per share, Oriental Bank of Commerce lost 0.6% to close at Rs115.35, Karnataka Bank gained 4.75% to close at Rs122.35 and Punjab & Sind Bank lost 2.06% to close at Rs49.95 per share.

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