Banks’ robust Q3 net not likely to sustain
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Jan. 30: The December quarter has seen a mixed set of numbers from most sectors, but banks as a group have done quite well. With a few exceptions, most large banks have posted a double digit growth in profits compared to the last year.
The three largest private sector banks — ICICI, HDFC Bank and Axis —have all seen their net profit for the third quarter increase by over 30 per cent. The large public sector lenders such as the State Bank of India, Punjab National Bank, Bank of India and Bank of Baroda have also done well during the quarter, posting profit increases from 7.8 per cent to 61 per cent (Bank of Baroda).
The performance of public sector banks would have looked better if not for the additional provisions they had to make for gratuity and employee pensions. One clear trend that’s visible for almost all the public sector banks is the increase in net interest margin — the difference between the rate that borrowers pay and what the depositors get.
Almost all the public sector banks have seen NIMs increase substantially —from 10 to 32 basis points (100 basis points equal 1 percentage point) — which is a big boost since most banks have an NIM of 3-4 per cent. SBI saw its NIM go up by 0.18 per cent during the quarter.
Even the smaller public sector banks such as Corporation Bank, Allahabad Bank and Union Bank have seen an improvement.
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