Second straight dip in bank bottomlines

Bank profits declined for the second quarter in a row in October-December 2004 "" albeit the fall this time was sharper than the previous quarter.

In the third quarter ended December 2004, the aggregate net profit of 37 listed banks showed an 18.9 per cent decline compared with a modest 8.3 per cent fall in the second quarter ended September 2004.

In percentage term, the near-19 per cent decline in net profit has been the second biggest. The largest fall in net profit (88.6 per cent) was posted during the quarter ended March 2001.

Industry leader State Bank of India (SBI) and 11 other banks bucked the trend with a net profit growth of 23.91 per cent.

Excluding these banks, the net profit of the listed 26 banks declined by 60.3 per cent.

SBI, despite higher provisioning, posted a 19.6 per cent rise in profit on the back of an almost 100 per cent rise in other income and a 32 per cent rise in net interest income.

Aided by other income and improvement in net interest income, Allahabad Bank, IDBI Bank, Corporation Bank, UTI Bank and HDFC Bank posted a decent growth in net profit.

Huge provisioning and a modest 9.1 per cent rise in net interest income were the two main reasons for the underperformance of the 26 banks.

The underperforming banks also suffered on the growth parameter, with interest expense up 3.66 per cent on a 6.76 per cent rise in interest income. Other income declined by 17.1 per cent.

The provisioning for the 26 banks rose 96 per cent, largely on account of the shifting of government securities from the available-for-sales category to the held-to-maturity category by banks.

That apart, a few banks made provisions for the forthcoming wage revision. As a result, the net profit of Bank of Baroda, Syndicate Bank, Canara Bank, Union Bank of India, UCO Bank, Oriental Bank of Commerce and State Bank of Mysore slipped.

The profit-making 12 banks had best of the both the worlds. Interest income of these banks rose 9.53 per cent, while the interest expense declined marginally 1.62 per cent.

Other income rose 34.8 per cent and net interest income rose 27.7 per cent. The provisioning for profitable banks rose 48.8 per cent.