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| Subdued showing in 2nd quarter by banking majors |
| BG Shirsat / Mumbai Nov 06, 2009, 00:00 IST |
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Indian banks failed to repeat their first-quarter show in the second quarter with sector giant State Bank of India and the largest private one, ICICI Bank, reporting subdued performance.
Apart from the poor show from these two, yield on advances in case of almost all listed banks fell by 15-35 basis points, showing their inability to pass the burden of high-cost deposits to lenders.
Advances grew at a slower pace of 16 per cent compared to deposits, which were up 21 per cent. This translated into an interest income rise of 10.21 per cent compared to a 11.27 per cent rise in interest outgo. However, a 40-60 points decline in cost of deposits to an average of 6.28 per cent (6.86 per cent a year ago) enabled banks to maintain their net interest margin (NIM). The NIM averaged 2.95 per cent compared to 2.94 per cent a year ago.
The net profit in the second quarter rose by 19.6 per cent compared to 64.4 per cent in the first quarter.
Other income, including from non-fund-based activities such as brokerage and commission, fees, earnings from foreign exchange and derivative transactions, and profit from investments, rose a robust 40.5 per cent. However, the share of other income in the total fell to 14.9 per cent compared to 15.7 per cent in the quarter ended June.
The net interest income (NII, that is, income minus expenditure) grew 7.9 per cent compared to 13.1 per cent in the first quarter. The fall in NII was due to slower growth in advances and higher growth in deposits. Among banks, SBI had a 2.8 per cent rise in NII, while ICICI Bank reported a 5 per cent decline. Punjab National Bank did well with an NII growth of 22.4 per cent while HDFC Bank reported a subdued 4.8 per cent rise.
AT A GLANCE
Banks performance in second quarter (%) |
| Bank |
Year on year growth |
NIM; qarter ended |
Cost of deposits |
| Net interest |
Net profit |
Sep ‘08 |
Sep ‘09 |
Sep ‘08 |
Sep ‘09 |
| Allahabad Bank |
22.23 |
700.36 |
2.7 |
2.84 |
6.9 |
6.08 |
| Andhra Bank |
18.72 |
69.61 |
3.42 |
3.14 |
6.1 |
5.8 |
| Axis Bank |
25.86 |
31.95 |
3.51 |
3.52 |
6.23 |
5.41 |
| Bank of Baroda |
22.48 |
60.43 |
2.8 |
2.63 |
5.59 |
5.29 |
| Bank of India |
3.36 |
-57.61 |
3.2 |
2.57 |
5.37 |
5.26 |
| Canara Bank |
14.33 |
71.98 |
2.7 |
2.66 |
6.6 |
6.47 |
| Federal Bank |
-0.55 |
-11.56 |
4.38 |
3.7 |
6.82 |
6.83 |
| ICICI Bank |
-5.19 |
2.56 |
2.4 |
2.5 |
7.03 |
6.17 |
| Indian Bank |
11.34 |
31.48 |
3.86 |
3.45 |
6.1 |
5.92 |
| ING Vysya Bank |
22.24 |
13.84 |
2.87 |
3.09 |
6.67 |
5.47 |
| Oriental Bank |
8.04 |
14.31 |
1.86 |
2.02 |
7.33 |
7.08 |
| PNB |
22.35 |
31.1 |
3.78 |
3.64 |
6.24 |
5.67 |
| South Ind Bank |
28.5 |
40.42 |
2.69 |
3.12 |
7.01 |
6.67 |
| SBI |
2.81 |
10.19 |
3.16 |
2.55 |
6.06 |
5.94 |
| Union Bank |
-11.27 |
39.74 |
2.49 |
2.34 |
6.29 |
5.81 |
| Vijaya Bank |
35.53 |
35.73 |
2.07 |
2.49 |
7.6 |
6.52 |
| Yes Bank |
30.48 |
75.59 |
2.8 |
3.1 |
9.2 |
7.2 |
| NIM; net interest margins reported by banks Net interest; interest earned minus interest expended |
However, banks expect to improve performance in the second half of the current financial year. Going ahead, SBI expects loans to grow 22-25 by the end of the current financial year, compared to 16 per cent in the second quarter and 23 per cent in the first quarter. As the bank continues to shed high-cost deposits in the next three to four quarters, the management expects the bank’s NIM to grow by 10-12 basis points (bps) for every quarter and cost of deposits to decline on a sequential basis for at least the coming four quarters.
ICICI Bank’s second-quarter results were in line with expectations with its net profit growing 2.5 per cent despite a sharp 15 per cent decline in interest income. NIM increased by 10 bps on the back of re-pricing of high-cost term deposits at lower rates and lower wholesale costs. With the bulk of high-cost deposits likely to get repriced in the second half, margins are expected to move up further. The management expects the bank may end up with a flat business growth in FY10.
HDFC Bank, which posted a strong 30 per cent rise in net profit and 41 per cent rise in revenue, has reaffirmed its expectation of 25-30 per cent revenue growth for the next two to three years. The company expects the projections to hold true as long as the market environment is relatively stable and not moving to either a boom or bust extreme. PNB has put in place a comprehensive road map wherein it expects to achieve total business of Rs 10 lakh crore by 2013 as against the current level of Rs 3.76 lakh crore.
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