The Bank posted a good set of numbers for Q2Fy16 but it has raised concerns that going ahead, it could see some stress on its asset quality. On the profitability front, its net profit showed a 19% (YoY) jump at Rs.1916 crore helped mainly by operating income and also low provisioning. Higher tax outgo pulled off some of the gains. NII rose 15% at Rs.4062 crore. Provisions for bad loans declined 37% (QOQ) and 2.5% (YoY) at Rs.707 crore.  Tax outgo rose 22% at Rs.1005 crore.

On the asset quality front, Gross NPA and Net NPA came exactly at same levels as in Q1 – 1.38% and 0.48% respectively but YoY, it has shown an increase from 1.34% and 0.44%. What is more worrying are the slippages. Without including sale to asset reconstruction company (ARC), slippages were at Rs.590 crore v/s Rs.1190 crore (YoY) but in current Q2, it sold Rs.1820 crore worth bad loans to ARCs for a net consideration of Rs.650 crore. This loss of Rs.1170 crore was absorbed in the current quarter itself wherein Rs.850 was used from contingency provision and Rs.340 crore was shown as additional NPA provision. What is worrisome is that over 25% of its assets are exposed to sectors which are currently considered to be high-risk like power, infra and metals. Though the NPA scene looks much better than what it was in June quarter, one needs to keep a strict watch in the coming Q3. None of the foreign brokerage houses, post this Q2 number have downgraded the stock, except reducing price target.