Business Daily from THE HINDU group of publications
Tuesday, Aug 08, 2006

Cross Currency

Group Sites

Home Page - Banking
Money & Banking - Financial Performance
Banks turn in good show on brisk credit offtake

Radhika Kamath

Loan growth in Q1 averaged 30 pc; net interest margins stay flat

Bangalore , Aug. 7

Despite being a slack season for banks, the first quarter this year has seen many banks reporting good set of numbers mainly due to the buoyancy in credit. The loan growth for the quarter averaged to about 30 per cent, that helped banks register an impressive growth in net interest income (NII).

Yield on advances, on an average, rose by 20-30 basis points to about 8.7 per cent. Aided by higher yields, NII for public sector banks increased by about 15 per cent on a year-on-year basis.

Industry leader State Bank of India, however, recorded a 9 per cent dip in its NII. The bank had benefited from a one-time tax refund of Rs 700 crore in the corresponding quarter last year that had helped boost its NII.

If one were to exclude this item to make a fair comparison, then the NII would have been higher by about 10 per cent.

Private sector banks, once again, managed to excel their counterparts in public sector on this parameter. The NII growth for these banks averaged to about 56 per cent.

Deposits for the banking sector grew by about 19 per cent. Rising interest rates has had its impact on the cost of working funds.

While yields on advances improved, cost of deposits also went up by about 15-20 basis points for most banks. This may be the reason for net interest margins for the quarter remaining almost flat.

Higher provisioning

Profit growth has been subdued for banks on account of higher provisioning on investments and standard assets. Provisioning, in the case of public sector banks, witnessed a growth of about 50 per cent against a higher growth of about 65 per cent for private sector banks. This has largely resulted in lower profit growth for most of the public sector banks.

Strong PAT

Despite higher provisioning and rising wage costs, new private sector banks' showing on profit after tax has been strong.

While HDFC Bank and UTI Bank led the league with a 30 per cent profit growth, ICICI Bank trailed behind with a modest 17 per cent growth.

For PSBs such as Punjab National Bank, Canara Bank, Bank of Baroda, profit growth was largely muted at about 3 per cent, while IOB and Bank of India were impressive with a rise of about 21 per cent.

Among the old private sector outfits, Federal Bank and Karnataka Bank disappointed with a negative growth in after tax profit, while Karur Vysya Bank managed a marginal rise of 1.9 per cent.

While treasury income has shown a mixed trend, fee income for most banks has been encouraging, clocking a growth of 30-40 per cent on an average.

More Stories on : Banking | Financial Performance

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Contest Contest

PNB Readership Survey Contest

Stories in this Section
It's sunny days for fresh recruits

Maharashtra, AP under threat of more rains
Kotak offers flat fee model for share deals
Tata Tele disconnects 32,000 lines
Air tickets may be cheaper than the surcharge
Oil price hike unlikely despite soaring crude price
Pathak report: Natwar provided political contacts
Coke, Pepsi banned in 4 States
Infotech mulls buys in engg, geospatial space
Banks turn in good show on brisk credit offtake
Centre likely to restrict Lanka pepper imports
Markets remain choppy ahead of US Fed meet
Kirloskar Oil betting on demands
Riding on commercial vehicles
BoB, Andhra Bank boards ratify PLR hike
Rains claim 52 lives in Maharashtra; flood alert in Gujarat

The Hindu Group: Home | About Us | Copyright | Archives | Contacts | Subscription
Group Sites: The Hindu | Business Line | Sportstar | Frontline | The Hindu eBooks | The Hindu Images | Home |

Copyright 2006, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line