Results review: PSBs' net profit grows 16% to Rs 39,974 crore in Q1

NII under pressure; asset quality continues to improve

Public sector banks (PSBs) posted 16.1 per cent year-on-year (Y-o-Y) growth in net profit at Rs 39,974 crore during the June 2024 quarter.

While net interest income (NII) showed subdued growth of 7.1 per cent, provisions and contingencies declined by 10.5 per cent Y-o-Y. This aided the bottom line to show steady growth.
 

Sequentially, net profit declined by 6.7 per cent from Rs 42,847 crore in the March quarter, according to data compiled by BS Research Bureau for 12 listed PSBs.
 

Country’s largest lender State Bank of India (SBI) accounted for about 44 per cent of the net profit of PSBs in Q1 FY25.
 

NII, the key revenue element, grew 7.1 per cent Y-o-Y to Rs 1.06 trillion. Sequentially, NII declined by 0.4 per cent over Q4 FY24. While the interest earned grew by 15.1 per cent Y-o-Y, the pace of growth for interest payout was faster at 20.5 per cent.
 

The rising cost of deposits amid intense competition for liabilities showed impact on NII in Y-o-Y as well as sequentially, senior PSB executives said. Karan Gupta, director, India Ratings, said the pressure on NII was expected given the rise in cost of deposits. The trend is expected to continue in the current financial year and may compress the net interest margin (NIMs) by 10-15 basis points (bps).  The weighted average rates on outstanding term deposits of state-owned banks rose by 54 bps from 6.46 per cent in June 2023 to 7 per cent in June 2024.

Weighted average lending rates on outstanding loans rose by just 2 bps from 9.19 per cent in June 2023 to 9.21 per cent in June.

Other income, covering fees, commissions and revenues from the treasury stream, grew by just 1.5 per cent Y-o-Y to Rs 34,416 crore in Q1. Under the revised norms for investment books, which came into effect from April 2024, some gains were shown in reserves instead in the profit and loss (P&L) accounts.

 

Other income fell by 25.4 per cent over Rs 46,146 crore in Q4. Provisions and contingencies, including those for standard loans and non-performing assets (NPAs), fell 10.5 per cent Y-o-Y to Rs 17,004 crore in Q1. Sequentially, however, they rose by 18.8 per cent from Rs 14,309 crore in Q4FY24.

An SBI executive said there was pressure on asset quality in agriculture loans, which is seasonal and would be normalised over a period.

There were slippages in the personal loan segment due to delayed salary payments by some state governments and part of it has already been recovered in Q2.
 

The provision for standard assets has also gone up due to high credit growth.
 

The asset quality profile improved with gross non-performing assets (gross NPAs) in absolute amounts declining by 18.9 per cent to Rs 3.28 trillion at end of June 2024 from Rs 4.05 trillion a year ago.
 

Sequentially also, they declined by 6 per cent from Rs 3.39 trillion at the end of March 2024.
 

Net NPAs, which are yet to be provided, also fell by 27.9 per cent to Rs 68,212 crore in June 2024. The figure was Rs 94,611 crore in June 2023. Sequentially, they dipped by 7.2 per cent from Rs 72,544 crore at the end of March 2024.