PSU banks see mixed Q2 but confident of better times ahead

It was a mixed day for the public sector banks that announced quarterly earnings today. While some, like Bank of Baroda, came out with a strong set of numbers, others like OBC failed to live up to expectations. CNBC-TV18's Gopika Gopakumar has a snapshot of how these banks have performed.

For banks, especially public sector banks, the July-September quarter has not been all hunky-dory. But they all have one thing in common: optimism that the coming quarters will see some strong growth coming in. Let's get down to brass tacks: Bank of Baroda beat street estimates with a 14% growth in net profit, helped by a 26% surge in net interest income.
A 13% rise in fee income, a fall in operating expenses, and improved asset quality also helped.
Domestic loan book has expanded 19% year-on-year. However, taken over the last six months, loan growth has been flat. The bank is confident it will hit 18% credit growth going forward.
MD Mallya, CMD of Bank of Baroda said "We would always like to ensure that the ALCO manages the overall liquidity and the deployment well to ensure that the NIMs are optimized. We have been working on NIMs in the range of around 3.2%-3.75%. It again depends on the overall composition of the liquidity and the credit growth in a particular quarter."
Meanwhile, Canara Bank has taken a bit of a beating this past quarter.
Profits fell 15% on account of higher provisions and muted 2% growth in net interest income. The bank completed its migration to a system that automatically recognises NPAs without manual intervention.
And this led to a spurt in bad loans to 1.73%, with fresh slippages at Rs 1,236 crore. But the bank maintains that the worst is over, and coming quarters will see a sharp turnaround in fortunes.
S Raman, CMD of Canara Bank said, "This quarter again we shifted 0 to 2 lakh of those small accounts to the non-performing asset (NPA) system. This has resulted in an additional NPA of Rs 610 crore and reversal of income of Rs 120 crore. So, whatever you are seeing is after taking into account of all these one-off negatives."
He further said the bank is on the path for much better quarters in Q3-Q4. "We have done all the hard work, which was required to be done. We are very confident about how this is going to pan up in Q3 and Q4," he added.
Higher provisioning also hurt Oriental Bank of Commerce. The net profit fell a sharp 58% as a result and net interest income also fell 8%.
Likewise, margins came under pressure, slipping to 2.64%.
The cruelest blow came from gross non-performing assets, which ballooned to 2.95%.
However, it's not an altogether gloomy picture for PSU banks. Smaller players like UCO, Dena and Corporation Bank have delivered a good set of numbers, boosted mainly by firm growth in net interest income and are optimistic that growth will not fag in coming quarters.