Subdued showing in 2nd quarter by banking majors

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