 "banking sector")
Listed commercial banks posted a combined net profit of Rs 6,675 crore for the September quarter of FY20, with an improvement in interest income and a dip in provisions for stressed loans. They had reported net loss of Rs 3,918 crore in the corresponding quarter last year.
This despite public sector banks (PSBs) recording net loss of Rs 727 crore in Q2FY20. Net profit of private banks, too, declined during the quarter under review by 1.7 per cent to Rs 7,076 crore.
Profit margins of Scheduled Commercial Banks (SCBs) have been considerably affected by the new deferred tax rates, as well as the sharp rise in provisions against stressed assets made by certain banks, according to an analysis by CARE Rating.
Net interest income (NII), the mainstay of earnings for banks, rose 16 per cent to Rs 1.07 trillion in Q2FY20 from Rs 92,739 crore in Q2FY19. The rate of growth in NII was 11.7 per cent in the corresponding quarter last year. Both PSBs and private banks recorded a steady rise in their NII at 12.9% and 20.4%, respectively, during the period under review.
The review covered 37 SCBs (18 public sector banks and 19 private sector banks) and the figures were as on November 14.
The net interest margin (NIM) ratio of SCBs improved from 3.02 per cent in Q2FY19 to 3.22 per cent in Q2FY20, driven by income growth of private lenders. This can be attributed to the consistent growth in interest income, as against a low-paced growth in the interest expense, CARE said.
NIMs of PSBs rose by 21 bps to 2.87 per cent during the quarter under review, as against 2.66 per cent in the September quarter last year. PSBs widened their NIMs as they have brought down their cost of borrowing by partially transmitting the rate cuts to depositors.
Private lenders recorded only a marginal improvement in their NIMs, from 3.68 per cent during Q2FY19 to 3.80 per cent in Q2FY20.
Domestic brokerage Motilal Oswal in a review of the second quarter performance said banks reported a slowdown in loan growth led by moderation in corporate lending, which reflects the weak economic environment; retail loan growth, however, remained steady.
The asset quality showed some improvement in the reporting quarter. The amount of gross non-performing assets of SCBs declined from Rs 9.93 trillion in September 2018 to Rs 9.18 trillion in Q2FY20.
PSBs registered a contraction in their gross NPA at Rs 7,.27 trillion for Q2FY20 from Rs 8.08 trillion in Q2FY19. Gross NPA amount of private banks grew from Rs 1.85 trillion during Q2FY19 to Rs 1.91 trillion in Q2FY20.
Amidst a challenging macro environment, asset quality trends were mixed with large corporate banks reporting better-than-estimated slippages (SBI, ICICI), while YES Bank and RBL reporting an increase in their watch list’s size/stressed assets, Motilal Oswal said.
