The COVID-19 pandemic and closure are putting a heavy strain on the microbank sector, with a small Ujjivan financial bank witnessing losses, a sharp rise in NPAs and portfolio risk and a sharp layoff due to differences in provisions for bad loans.
On Friday, the bank’s shares fell 19 percent to 19.70 rupees on BSE after announcing that Nitin Chugh, the CEO and his CEO, resigned on August 19 a week ago. Harish Devarajan resigned as additional manager (free of charge). Previously, the Bank’s financial statements for the quarter ended in June 2021 when it revealed deteriorating results. Previously, B Mahapatra resigned as chairman of the bank in February 2021 for 10 months.
The bank, introduced by Ujjivan Financial Services founder Samit Ghosh, began operations in February 2017. It reported a loss of ISK 233 million in the June quarter, compared to revenue of ISK 55 billion the previous year. What upset the market and analysts was the deteriorating quality of the bank’s assets with large NPAs reaching up to 1,374 crore (9.8 percent improvement) in June this year from 139 crore (1%) last year. The risk portfolio lost up to 30.8 percent in June from 1.8 percent last year. This means that up to ISK 4,084 million of its loan portfolio is at risk.
According to a member of the bank’s board who did not want to be identified, the problem started a year ago when Covid came to Iceland and customers refused to pay. “There was not enough allocation in the first two quarters of FY21. There were differences of opinion between the project manager (Ujjivan Financial Services) and the board of directors on the issue of the provision. The former chairman, Mahapatra, resigned. Then there were more high provisions in the third quarter,” he said.
“Things are normal now. Museums have improved and the supply of 75 percent coverage is among the highest in the industry and the bank is well capitalized at 26 percent. The situation will return to normal if the third wave does not happen and the bank’s customers are vaccinated,” said the CEO. bankans. Earlier this month, when the results were announced, Nitin Chugh, outgoing doctor and CEO, said: “The start of a second wave of Covid and the limiting and closing factors have hit the industry, especially the microbank sector, which was facing heavy pressure. Our business volume and portfolio were affected by movement restrictions, which led to a low overall performance in the first quarter of FY22. ”
The bank’s share price fell by 56 percent from a 52-week high of 44.50 rupees per BSE.
Last week, the Nomination and Remuneration Committee of the Board of Directors appointed Samit Ghosh, former CFO of Ujjivan, Sudha Suresh, former bank of Andhra Bank CMD BA Prabhakar and Ravichandran Venkataraman as additional directors as of August 20, 2021. While Prabhakar is expected to become the bank that Carol Andrade will be hired as the bank’s official in special positions until a new CEO and CEO are hired, according to sources.
“Chugh’s resignation came as a surprise to us. He was under a lot of pressure and the senior team that founded the bank also left the bank,” said a Ujjivan Financial Services official, a supporter of the bank. Samit Ghosh was previously rejected by shareholders due to the position of CEO and CEO of Ujjivan Financial Services, but continued as chairman.
“Ujjivan SFB’s profits were weak mainly due to rising arrears which led to increased borrowing costs. Net interest income was hurt by deficit-driven interest rates. Up to 150,000 customers already have. NPAs until June 2021 started paying in July and saw total updates 300 million without restructuring, “says Centrum Broking’s report.