StatsGuru-20-August-12

The banking sector has been the focus of much concern, given its high-profile debt to troubled sectors like power and aviation. Debt restructuring, too, has grown, worrying analysts. This comes on top of already poor figures for the growth in net non-performing assets (NPAs), as seen in Table 1. NPAs have climbed much faster for banks in the public sector, which have lent more heavily to the agricultural sector. Even aside from the ballooning of debt restructuring, growth in net NPAs has sharply increased over the past year. Although NPAs have climbed faster in the public sector, growth in provisioning has not climbed to match, as Table 2 shows, and is now in negative territory.

With worsening results, the pressure to not provision properly will only increase. As Table 3 shows, growth in net interest income has dropped sharply for public sector banks. Profit growth, however, has been steadily increasing. Indeed, as Table 4 shows, profit margins have also been reported as increasing by public sector banks, while staying largely static for the private sector.

This comes at the same time that, as Table 5 demonstrates, growth in deposits has largely slackened, in spite of a more recent uptick. The overall picture is puzzling: Apparently strong profits even as fundamentals, as measured by provisioning and NPAs, worsen — especially for public sector banks.(Click here for tables)

The market, however, has remained largely sanguine about this. As Table 6 shows, the share prices of major banks have declined from the heights of early 2011, but they have been relatively steady throughout. Indeed, as Table 7 shows, many have gained considerably in value in the year to date, including some public sector banks. Year-to-date losses have not been in the same ballpark.