Public banks catch up

INDIA INC PERFORMANCE IN Q1/ BANKING SECTOR

A 34.69 per cent decline in the net profit of State Bank of India, country's largest commercial bank which accounts for one-fifth of the banking industry, has its impact on the overall profits of the banking sector.

The sector reported a modest 7.19 per cent rise in net profit. However, if one excludes SBI from the sample, the banking sector's net profit growth would go up to 23.67 per cent.

While SBI disappointed analysts, ICICI Bank and HDFC Bank posted robust growth in their income. ICICI Bank posted 61.7 per cent rise in revenue while its net profit rise was 16.98 per cent.

HDFC Bank posted revenue growth of 68.24 per cent and its net profit rose 30.39 per cent. Among the public sector banks revenue growth was high for Canara bank (26.94 per cent) and Bank of India (29.18 per cent).

Punjab National Bank, the third largest bank in the country after SBI and ICICI Bank, posted marginal 2.61 per cent rise in net profit. Canara Bank, Bank of Baroda and State Bank of Mysore too disappointed with less than five per cent growth in net profits.

Apart from SBI, the banks that posted decline in net profit during the quarter are Union Bank of India, Allahabad Bank and Federal Bank.

The first quarter performance has triggered a re-rating of the banking sector as net interest margins for most banks improved by 10-25 basis points. Another highlight of this quarter's result was acceleration in fee income of the public sector banks.

Private banks have been seeing a consistent rise in fee income at over 30 per cent for past couple of years. Finally, some of the PSU banks are catching up with their private peers on this front.

There was also substantial improvement in banks' asset quality with most banks posting decline in their gross and net non performing assets.