Banks likely to post robust Q4 numbers; profit may hit record high in FY23

The banking sector is likely to post good numbers in the fourth quarter ended March 2023, and the total profit of public sector banks (PSBs) is expected to touch a record high of Rs 1 lakh crore in FY23, aided by the decline in bad loans and healthy loan growth.

According to a senior bank official, the country's biggest lender State Bank of India (SBI) expected to earn a profit above Rs 40,000 crore in the financial year ended March 2023. In the first nine months of the previous financial year, the bank's bottomline stood at Rs 33,538 crore, higher than Rs 31,675.98 crore recorded in FY22.

Similarly, other public sector lenders are also likely to report encouraging numbers, helped by a decline in non-performing assets (NPAs), moderation in slippages, double-digit credit growth and rising interest rate.

For the first nine months of 2022-23, all 12 PSBs have earned a cumulative profit of Rs 70,166 crore compared to Rs 48,983 crore in the year-ago period, an increase of 43 per cent.

"The trend would continue in the fourth quarter. It is fairly possible that PSBs would be earning around Rs 30,000 crore in the fourth quarter and thus close the financial year 2022-23 with a profit of Rs 1 lakh crore," Punjab & Sind Bank managing director Swarup Kumar Saha told PTI.

The PSBs had earned a cumulative profit of about Rs 15,306 crore in the first quarter, which increased to Rs 25,685 crore in the September quarter and Rs 29,175 crore in the three months to December. All public sector banks, barring Punjab National Bank (PNB), registered an increase in net profit in the December quarter.

PNB's net profit for the third quarter was down 44 per cent to Rs 628 crore due to higher provisioning. SBI recorded the highest net profit of Rs 14,205 crore, an increase of 68 per cent.

However, Saha said, there would be pressure on the net interest margin of all banks due to rising deposit rates and a decline in current accounts and savings accounts (CASA).

Most banks have recorded healthy loan growth in the fourth quarter despite rising interest rates, he added.

For PSBs, brokerage firm Emkay Global Financial Services Ltd in its research report said provisioning is likely to ease on a quarter-on-quarter basis, given that the bulk of PCR (provisioning coverage ratio) build-up has largely been done and NPAs are likely to trend down.

However, it said, a recent prescription by the RBI to build specific provisions on large conglomerates would call for some additional provisions for corporate-heavy large banks. That said, these large banks can dip into contingent buffers to offset these specific provisions.

"On overall, we expect ICICI Bank to report strong profitability among large banks, while Axis Bank is expected to sink into losses due to write-offs of goodwill on Citi Bank's portfolio acquisition. IndusInd Bank too should report healthy profitability, led by better growth and lower provisions," it said.

Notwithstanding some margin cool-off, it said, Federal is also expected to report healthy profitability, while RBL is expected to report better profitability (1 per cent RoA) versus Q3.

Private banks increased their profit by 33 per cent to Rs 36,512 crore in Q3 from Rs 27,370 crore in the previous year. Except for Bandhan Bank and Yes Bank, all private lenders too reported an increase in net profit in Q3. HDFC Bank's net profit of Rs 12,259 crore accounted for 45 per cent of the private banks' profit.