Pvt banks pip PSBs in fee-based income

Leading private players, ICICI Bank, HDFC Bank, IDBI Bank and UTI Bank, have outdone PSU heavy-weights in terms of growth in fee-based income, which led to higher profit growth in a falling interest rate regime.

ICICI Bank led the chart with almost 100 per cent growth in fee-based income, mainly generated from commission, brokerage and exchange transactions during the last four years, followed by HDFC Bank (60 per cent), IDBI and UTI Bank (over 40 per cent each), according to an ICRA report.

The growth in fee income of PSU majors like Canara Bank, Punjab National Bank, Bank of Baroda and Bank of India was less than 10 per cent during 1999-2003, it said.

Analysing the fee incomes of top four public sector banks and four private sector banks, ICRA said the absolute fee income of the PSU banks was expectedly higher than that of private sector banks due to their higher scale of operations.

However, it said, "the proportion of exchange and brokerage as a percentage of the total fee income is higher for the private banks."

At present, ICRA said Indian banks' interest income constitute 80 per cent of their total income. But non-interest or fee-based income, especially trading profits, has become very significant given the declining rate of interest in the economy, ICRA said.

With the scope of further reduction in interest rates being limited, ICRA said the banks' income from trading profits could decline and that would prompt banks to diversify their income profile to maintain their current level of non-interest income.