State-run banks post 81% rise in Q4 profit; NII up 18.5% to Rs 70,825 cr

Enhance capital adequacy and provisions for bad loans

Public sector lenders have posted an 81 per cent year-on-year (YoY) increase in net profit in the fourth quarter ended March 2022 (Q4FY22) on improvement in net interest income (NII) and reduction in provisions for bad loans.

For FY22, net profit rose by 91.3 per cent.

Nine of the 12 public sector banks have announced results so far.

NII, which is earnings from loans minus what is paid on deposits, rose 18.5 per cent YoY to Rs 70,825 crore in Q4FY22.

While low interest rates on loans shrank interest income, banks benefited from a fall in the cost of funds amid abundant liquidity in the system as the Reserve Bank of India pumped in resources to support economic revival and growth.

The net interest margin (NIM) moved up for all lenders.

State Bank of India’s NIM was 3.36 per cent in Q4FY22, up from 3.26 per cent in Q4FY21.

Central Bank of India, which is looking for an exit from prompt corrective action (PCA), saw a sharp uptick in the NIM from 2.04 per cent in March 2021 to 3.26 per cent in March 2022.

Unlike improvement in NII and margins, other income comprising revenues from treasury trading in securities, commissions, and fees declined by 27.7 per cent to Rs 27,873 crore in Q4FY22.

The gradual increase in yields dented gains in the bond portfolio.

Karthik Srinivasan, group head, financial sector ratings, ICRA, said the results of public sector banks were in line with the rating agency’s expectations.

There are no negative surprises so far. The improvement in asset quality is expected to continue into FY23. However, one needs to monitor the restructured loan books. These accounts will come out of the moratorium this financial year.

The asset quality of all lenders improved with reduction in bad loans and increase in provisions for the existing bad loans portfolio.

SBI’s gross non-performing assets (GNPAs) declined from 5 per cent in March 2021 to 4 per cent in March 2022.

Its provision coverage ratio (PCR) rose from 87.8 per cent to 90.2 per cent in March 2022.

For Kolkata-based UCO Bank, GNPAs, which were at 9.6 per cent in March 2021, declined to 7.9 per cent in March 2022.

Its PCR was up at 91.4 per cent in March 2022 from 88.4 per cent.

Cautious about loans restructured during the pandemic times, many banks are maintaining provisions for exposures that are higher than regulatory norms.

SBI Chairman Dinesh Khara said the country’s largest lender had created sufficient contingency provisions against restructured books “to insulate our balance sheet from any future shocks”.

The capital adequacy ratio (CAR) of the banks improved to 13.7-16.9 per cent in March 2022 from 12.6-15.7 per cent in March 2021.

The CAR is above the minimum regulatory requirement of 11.5 per cent.

FY22, especially the second half, saw a gradual revival in corporate credit demand. SBI said corporate credit continued to trend upwards with 6.35 per cent YoY growth to Rs 8.7 trillion in March 2022.

Bengaluru-based Canara Bank’s corporate loan portfolio expanded 8.27 per cent to Rs 3.19 trillion by March 2022.

Bank of Maharashtra, a medium-sized bank, reported a 37.57 per cent increase in corporate and other loans to Rs 54,570 crore in FY22.

According to the RBI data, credit to industry rose 7.1 per cent in FY22 (Rs 2.09 trillion) as against a contraction of 0.4 per cent (reduction of Rs 11,000 crore) in FY21, the year that saw the visitation of the pandemic.

Infrastructure saw good traction with growth scaling to 9.3 per cent (Rs 1.01 trillion) in FY22 from just 1.6 per cent (Rs 17,787 crore) in FY21.

The biggest difference expected this fiscal year is the upward shift in corporate credit growth.

It is expected to grow 8-9 per cent, according to CRISIL Ratings.