)
The recovery in banks' fee income growth in the first half of 2013-14 (April-September) might not sustain for long, fear bankers and sector analysts.
Corporate fee income growth has been muted for several quarters, as project financing has been slow due to an uncertain macroeconomic environment. However, the rising spending on cards, increase in sale of third-party products and strong demand for consumer loans allowed banks to earn higher retail banking fees in the past two quarters. It helped them offset the slowing in corporate fees to an extent.
Yet,bankers say this is unlikely to continue in the second half of the current financial year. "The fee income growth has been slower than expected in the third quarter. Retail fee growth appears to have peaked, while corporate fee growth continues to stay weak," said the chief financial officer of a mid-size private bank. He requested anonymity, as he was not authorised to speak on the bank's earnings before it announced its financial results later this month.
The use of plastic money has seen a decline in recent months. Credit card spends in point-of-sale terminals in September 2013 amounted to Rs 10,417 crore, compared to Rs 10,748 crore in August and Rs 11,039 crore in July, showed data from the Reserve Bank of India.
Bankers say the growth in third-party product sale has also moderated, leading to deceleration in retail fee growth. Analysts had a similar view. "We expect fee income growth to remain tepid not only in the third quarter but in the fourth. The underlying factors do not appear strong and we expect fee income growth to slow in the second half," said Vaibhav Agrawal, vice-president, research, banking, at Angel Broking.
"Core fee pressure is likely to continue, with private banks expected to report less than balance sheet growth in fees and public sector banks expected to report flat fee numbers. With limited project or capital expenditure-related sanctions, large corporates’ fee growth is unlikely to improve in the next six to nine months. Hence, fee growth for most corporate balance sheet-linked banks will remain muted," Adarsh Parasrampuria and Pritesh Bumb, analysts with Prabhudas Lilladher, wrote in a recent note to clients.
