Vijaya Bank’s Q3 Net Zooms
Vijaya Bank’s profit surge comes in the backdrop of visible strain in asset quality and concerns over declining interest margins. Analysts believe Indian banks had benefited from higher net interest margins over the past five years on increasing corporate demand for expansion funds. With surplus cash in the banking system after the state-mandated November 8 currency exchange, interest margins at lenders are now as much under investor scanner as are bad loans. The Street welcomed Vijaya Bank’s fourfold increase in the December quarter profit, with the stock gaining 20%, its highest daily permissible limit.
At .₹ 577 crore, other income for the Bengaluru-based bank in the December quarter almost trebled from Rs 209 crore in the year-ago quarter, helping offset a sequential increase of Rs100 crore in provisioning for non-performing assets (NPAs). Net profit rose to .₹ 230 crore from .₹ 53 crore in the same quarter a year ago. The bank that had about .₹ 6,305 crore of gross NPAs in the quarter ended December, down sequentially from .₹ 6,491 crore. As a percentage of advances, gross NPAs stood at 6.98% of advances in Q3 , from 7.07% in the September quarter. The bank had recognized 4.32% of its gross advances as bad loans in the year-ago period. Provision for bad loans increased to .₹ 424.1 crore from .₹ 278.7 crore in the yearago period.
“Post Vijaya Bank’s result, stocks of mid-sized banks has risen on a rub-off effect,” said Ravikant Bhat, AVP Research, IDBI Capital Markets. Shares of the bank, which has a market capitalisation of about .₹ 6,400 crore, ended at .₹ 64 on NSE.
Net interest income (interest earned minus interest expended) increased by 22.7% at .₹ 906 crore during quarter under review against .₹ 738 crore in the corresponding quarter of previous fiscal.