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India's biggest banks post fiscal Q1 net profits as provisions fall

India's biggest banks posted higher profits for the fiscal first quarter ended June 30 on the back of improving asset quality.

State Bank of India, the country's largest bank by assets, and Punjab National Bank more than halved their provisions in the period to swing back into the black year over year.

State Bank's standalone net profit for the quarter was 23.12 billion rupees, against a net loss of 48.76 billion rupees a year ago, while Punjab National Bank posted an unconsolidated profit of 10.19 billion rupees against a loss of 9.40 billion rupees. Provisions and contingencies fell to 91.83 rupees and 20.23 billion rupees, respectively, from 192.28 billion rupees and 57.58 billion rupees.

Private-sector lender ICICI Bank Ltd. posted a standalone net profit of 19.08 billion rupees against a previous loss of 1.20 billion rupees, as provisions and contingencies fell to 34.96 billion rupees from 59.71 billion rupees.

Even banks that reported higher provisions turned in standalone net profits for the first quarter year over year. Bank of Baroda saw this rise to 7.10 billion rupees from 5.28 billion rupees, in spite of provisions increasing to 32.85 billion rupees from 21.66 billion rupees.

HDFC Bank Ltd. and Axis Bank Ltd. also reported unconsolidated profits of 55.68 billion rupees and 13.70 billion rupees, respectively, up from 46.01 billion rupees and 7.01 billion rupees. Provisions for the quarter grew to 26.14 billion rupees and 38.15 billion rupees, respectively, from 16.29 billion rupees and 33.38 billion rupees.

India's banking sector has grappled with bad debts in recent years, with the government introducing policy measures such as the Insolvency and Bankruptcy Law, which helps to ease bad debt resolution, to tackle the concern.

The Reserve Bank of India however expects the bad loan cycle to have turned around, observing in its June Financial Stability Report that "the bulk of the legacy [NPAs are] already recognized in the banking books."

The central bank expects commercial lenders to post a gross NPA ratio of 9% in March 2020, from 9.3% in March 2019.

As of Aug. 8, US$1 was equivalent to 70.50 Indian rupees.

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