PSB's net profit more than doubles at 124.8% in Q1 to Rs 34,418 crore

Sequentially bottom line shows a small dent

The net profit of public-sector banks (PSBs) jumped 124.8 per cent year-on-year (Y-o-Y) to Rs 34,418 crore in the first quarter (Q1) of this financial year (FY24) on treasury gains and healthy growth in net interest income (NII) backed by strong credit offtake.

The robust growth in other income and a decrease in provisions also contributed to a healthy bottom line, according to analysis based on data compiled by BS Research Bureau for listed state-owned banks. State Bank of India, the country's largest lender, accounted for nearly half of the net profit of PSBs in Q1.

However, quarter-on-quarter, net profit fell by 0.2 per cent from Rs 34,483 crore in the year-ago quarter. This was due to a 0.8 per cent decline in NII and a 17.6 per cent decline in other income.

 

For all listed banks — both private and state-owned lenders — net profit grew by 68.8 per cent Y-o-Y to Rs 73,393 crore. Q-o-Q, it grew by 19 per cent from Rs 61,672 crore in the fourth quarter of FY2023.

Back to the performance of PSBs, their NII expanded by 26.3 per cent Y-o-Y to Rs 99,114 crore. This reflects the benefit of a spike in lending rates. However, Q-0-Q, NII fell by 0.8 per cent compared to Rs 99,947 crore in Q4FY23.

Bank executives cited robust loan growth of 16 per cent Y-o-Y until the end of June, as well as a pattern of immediate repricing of loans whilst deposit revision lags, as key factors contributing to the strong show of the first quarter of FY24.

The Reserve Bank of India has raised policy repo rates by 250 basis points since May 2022. However, the repo rate remained unchanged in the monetary policy reviews in April and June.

In the current tightening cycle (May 2022-June 2023), PSBs have been proactive regarding rate transmission on fresh loans, with over 173 bps, whereas private banks lagged at 146 bps, India Ratings said in a preview.

For outstanding loans, the pace of transmission was lower at 96 basis points for public sector banks, compared to 105 bps for private lenders.

Deposits grew by 13.2 per cent Y-o-Y until June 30. The interest rates on liabilities, including deposits, are revised over a period. Private banks have repriced outstanding deposits by over 140 bps, which remains higher than the PSBs’ repricing of 135 bps, the rating agency said.

Other income, which includes fees, commissions, and revenue from the treasury stream, grew by 82.5 per cent Y-o-Y to Rs 33,916 crore in Q1FY24. Growth in loan volumes helped increase fees in the first quarter. However, Q-o-Q, other income fell by 17.6 per cent compared to Rs 41,167 crore in Q4FY23.

Provisions and contingencies, including those for standard loans and non-performing assets (NPAs), decreased by 19.8 per cent Y-o-Y to Rs 19,008 crore in Q1. This reflects the lower asset quality pressure in a favourable business and economic environment.

The asset quality profile remained robust with the gross NPAs in absolute terms declining by 23.8 per cent Y-o-Y to Rs 4.05 trillion at the end of June, down from Rs 5.31 trillion a year ago. Net NPAs, or bad loans yet to be provided for, also fell by 36.2 per cent to Rs 94,611 crore in June, down from Rs 1.48 trillion a year ago.