Provisioning hits banks' profit

The banking sector's profitability took a knock in the quarter ended December 2006 owing to higher provisioning, costly borrowings and a dismal performance by the country's largest bank, State Bank of India (SBI).

The 32 listed banks, both private and public, posted 21.5 per cent growth in net profit to Rs 6,370 crore in the third quarter against Rs 5,245 crore in year-ago period and 26.1 per cent rise in interest revenue.

Interest expenditure, however, increased at a higher pace by 35.2 per cent compared with other income, which rose by 21.6 per cent.

The banks' provisioning for bad loans rose 57.9 per cent (Rs 1,732.58 crore) to Rs 4,726.39 crore. Provisioning accounted for 74 per cent of their net profit and 9.9 per cent of their interest income. 
 

HOW THEY FARED
(Rs in crore)	Net Profit		% Chg
	Dec '05	Dec' 06
ING Vysya Bank	4.86	14.33	194.86
Bank of Maharashtra	26.75	74.32	177.83
Bank of Rajasthan	9.61	19.80	106.04
Bank of India	143.10	254.87	78.11
Yes Bank	14.50	25.10	73.10
Jammu & Kashmir Bank	50.64	83.89	65.66
Bank of Baroda	202.18	329.13	62.79
Kotak Mahindra Bank	32.64	45.41	39.12
Vijaya Bank	58.80	92.73	57.70
State Bank of Bikaner & Jaipur	52.39	77.86	48.62

As many as 10 banks have made higher provisioning than the industry average, which slowed down profit growth to 14 per cent.

Net profit of 12 private banks increased 41.3 per cent to Rs 1,717.25 crore in October-December 2006 (Rs 1,215.63 crore in Q3 2005), while net profit of 20 public sector banks rose by 15.5 per cent to Rs 4,652.54 crore (Rs 4,029.15 crore).

The profits of ING Vysya Bank, Bank of Maharashtra and Bank of Rajasthan more than doubled during the quarter. ING Vysya's profit jumped 195 per cent from Rs 4.86 crore to Rs 14.33 crore, while Bank of Rajasthan reported a net profit of Rs 19.80 crore against Rs 9.61 crore.

Among public sector banks, Bank of Maharashtra reported a profit growth of 178 per cent to Rs 74.32 crore against Rs 26.75 crore a year earlier, whereas Bank of India's bottom line grew Rs 254.87 crore (Rs 143.10 crore).

The three other public sector banks, however, reported a decline in their third quarter earnings. Dena Bank (Rs 70.53 crore), State Bank of India (Rs 1,065.06 crore) and State Bank of Travancore (Rs 42.26 crore).

Private sector banks have increased their net profit by around 30-45 per cent. ICICI Bank (Rs 910 crore), HDFC Bank (Rs 296 crore), UTI Bank (Rs 185 crore) and Centurion Bank of Punjab (Rs 34 crore).