SBI, ICICI Bank report rise in bad debts

Rising interest rates, bad loans and globally-induced volatility in stock and bond markets have combined to hit the country’s banks hard, reports HT Correspondent.

Rising interest rates, bad loans and globally-induced volatility in stock and bond markets have combined to hit the country’s banks hard, according to early indications coming from their quarterly earnings.

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On Saturday, the SBI and its private sector rival ICICI Bank reported a rise in bad debts as higher interest rates hurt retail loans such as personal loans, credit card dues and automobile loans through the April-June period – the fiscal’s first quarter.

SBI managed to post a 15 percent rise in quarterly profit as fee income more than doubled, but ICICI Bank reported an unexpected fall in profits, largely because of loss in the value of its bond and equity portfolios.

SBI’s net profit rose to Rs 1,641 crore in the April-June period from Rs 1,426 crore rupees in the same quarter a year ago, as its income from selling insurance products and mutual funds surged to Rs 2,400 crore.

ICICI Bank said quarterly profit dropped to Rs 728 crore from Rs 775 crore a year ago, as it set aside Rs 594 crore for falling value of bonds and shares it owns, or the so-called “mark-to-market” losses.

Such losses are attributed to the volatility in the stock and bond markets, which have gone through wild swings since a housing finance crisis in the US snowballed into a global financial turmoil earlier this year.

The crisis has also been aggravated by rising inflation, which has forced central banks worldwide, including India, to raise interest rates repeatedly. Higher interest rates, in turn, have slowed credit growth and caused increased defaults.

State Bank's net non-performing assets – bad debts -- rose 14 percent to Rs 6,300 crore and ICICI's surged 51 percent to Rs 4,030 crore.