Rising yields hit banks' treasury gains

Treasury profits of commercial banks have taken a hit in the first quarter of the financial year ended on June 30, 2004, owing to the rise in bond yields.

However, banks' focus on core business and fee-based income have yielded handsome profits. Despite posting a loss of Rs 6 crore in treasury income in the June quarter, as against a profit of Rs 6 crore in the year-ago quarter, IDBI Bank's net profit surged 64 per cent to Rs 36.7 crore from Rs 22.3 crore.

The bank's managing director Nageshwar Rao said the bank had posted profits on account of the bank's increased focus on core earnings. Its fee-based income grew 29.6 per cent to Rs 47.7 crore from Rs 36.8 crore.

So far, Corporation Bank is the only bank to have shown a drop in its net profit in the quarter ended June 2004 to Rs 105.51 crore from Rs 126.43 crore in June quarter of 2003, a 16.24 per cent fall.

K Cherian Varghese, chairman and managing director of the bank, said the fall in the profit was due to fall in profit from sale of securities to Rs 15 crore from Rs 57 crore. Syndicate Bank, too, witnessed a huge fall in its treasury income from to Rs 562 crore from Rs 1,863 crore.

Not all banks have posted losses in treasury operations. Three public sector banks have seen a rise. Union Bank of India recorded a marginal rise in treasury profit to Rs 637.93 crore from Rs 535 crore in the corresponding quarter.

Likewise, Canara Bank's treasury profits rose by over 20 per cent to Rs 173 crore compared to Rs 143 crore. The treasury income of Allahabad Bank increased to Rs 291.13 crore compared with Rs 184.89 crore.

Among the banks in the private sector, HDFC Bank's treasury profits declined to Rs 35.18 crore from Rs 101.46 crore. Yet, the bank posted a rise of 30.5 per cent in its net profit to Rs 139.97 crore. This was on account of higher reliance on core banking activities, said a senior official.