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Informist, Thursday, Mar. 6, 2025

 

By Kshipra Petkar

MUMBAI – The 17 banks in Nifty 200 index reported a 9.7% on-year growth in net profit excluding exceptional items, almost double the 5.2% growth estimated by analysts for the sector. These banks also almost met the 10% profit growth estimate for the Nifty 200 index companies and marginally outperformed the 8.8% growth the Nifty 200 companies reported. As many as 11 out of 17 banks outperformed the sector estimate. Bank of Maharashtra, Indian Overseas Bank, and IDBI Bank are not included in this analysis as consensus estimates for these three were not available. Including these three banks, the net profit of the 20 banks in the Nifty 200 grew 10.6% on year for the December quarter. Including exceptional items, the net profit of these 20 banks was up 21.6% on year.

 

The net interest income of 17 banks for which analysts' estimates were available rose 6.5%, significantly lower than expectations of a nearly 8% rise. Both private and state-owned banks reported lower net interest income compared with the expectations for the sector. This was due to slower loan growth and lower net interest margins resulting in weak core pre-provisioning operating growth, Sharekhan said in its report. The cumulative net interest income of all 20 banks rose 7.10% on year. Public sector banks reported a 5.4% increase in net interest income whereas private sector banks reported a 9.13% increase on year.

 

Public sector banks' net profit growth was higher than private sector banks. In Oct-Dec, the bottom line of 10 public sector banks, excluding exceptional items, rose 18.6% on year. For the seven PSU banks for which estimates were available, the bottom line grew 17.5%, higher than the analysts' estimate of 7.2%. Including the exceptional expense of the State Bank of India from the year-ago quarter, the overall net profit growth for public banks is 46.3% on year, data showed. SBI's net profit for Oct-Dec last year had plummeted 35.5% as the bank had made higher provisions for arrears in wages and pension.

 

The bottom line of private banks rose 3.2% on year, slightly lower than analysts' estimate of 3.5%. Nirmal Bang Institutional Equities said the muted growth in private banks' net profit was due to weak operating performance and a steady rise in credit costs. On other hand, the sharp growth in the net profit of public sector banks was due to lower credit costs.

 

The net interest margins of banks fell 10 basis points on year to 3.07% in the December quarter. This decrease resulted from muted net interest income growth, elevated deposit rates, and slower growth in current account and savings account deposits, CareEdge Ratings said in a report. Among them, public sector banks' margins fell 11 bps to 2.68% while private sector banks margins declined 10 bps to 3.71%, the report said. Analysts expect a further moderation considering the Reserve Bank of India will cut the repo rate going ahead. In February, the RBI had cut the repo rate by 25 basis points to 6.25%.

 

"As the banking sector navigates through a turn in the rate cycle, the outlook on margins and recovery in overall growth will be watched closely. While the 25-basis-points rate cut in Feb'25 will only have a partial impact on yields during 4QFY25 (Jan-Mar), the full impact on margins will be visible when banks report their 1QFY26 (Apr-Jun) results," Kotak Institutional Equities said in a report.

 

OUTPERFORMERS
A sharp fall in provisions and improvement in asset quality lifted the net profit for public sector banks for the quarter. Seven out of 10 state-owned banks reported higher than the cumulative growth of 18.6% reported by all of them.

 

Provisions of state-owned banks fell over 21% on year and 42.2% sequentially. This was because most banks had already made contingency provisions or floating provisions in the previous quarter. However, Canara Bank, Indian Overseas Bank, and State Bank of India saw a rise in provisions for the latest quarter.

 

Public sector banks' asset quality improved, which helped them post higher profits. This was mainly because public sector banks held a lower share of unsecured loans compared to their private sector peers, Nirmal Bang Institutional Equities said in a report. Punjab National Bank's gross non-performing asset ratios fell the most among other banks by 215 basis points on year to 4.09% as on Dec 31 because the bank saw a higher recovery of bad loans.

 

 

State Bank of India and Bank of Maharashtra had the lowest gross non-performing asset ratio among all public sector banks in the Nifty 200 index, at 2.07% and 1.80%, respectively, as of Dec. 31.

 

In terms of profitability, only Bank of Baroda, Canara Bank, and State Bank of India underperformed the sector estimate due to a fall in net interest income. According to data, the net interest income of the remaining seven public sector banks grew 4.1% in Oct-Dec, lower than analysts' estimate of a 5.9% growth.

 

The moderation in net interest margins of state-owned banks was lower compared with the private sector banks. Out of the 10 public sector banks, only four banks--Bank of Baroda, Bank of India, Canara Bank and SBI--saw a fall in margins. Punjab National Bank saw a fall in margins only on a year-on-year basis. "PSBs (public sector banks) have a higher share of MCLR-linked loans, with Indian Bank holding the highest share at 57%, followed by Canara Bank at 48%, SBI at 36%, and PNB at 32%, which will allow them to show greater NIM resilience as underlying loans are repriced with a 6M/12M (6 month/12 month) lag," Motilal Oswal said in a report.

 

According to an ICICI Securities report, public sector banks delivered higher loan growth than private sector banks but lagged on deposit growth. Out of 10 public sector banks, loan growth of six banks moderated in the December quarter. Bank of Baroda, SBI, Bank of India, and Union Bank of India saw a slowdown in the personal loan book on a year-on-year basis. Bandhan Bank saw a decline in the microfinance book on a year-on-year as well as on a sequential basis.

 

UNDERPERFORMERS

Rising provisions, slippages, and slower loan growth were the main reasons behind the underperformance of private sector banks. Provisions of private sector banks rose 29% on year and nearly 9% on a sequential basis. Private sector banks' provisions rose due to higher exposure to unsecured loans--microfinance, credit cards, personal loans, among others. These segments saw higher stress in the latest quarter which led to higher delinquencies and, hence, higher provisions.

 

Axis Bank, Kotak Mahindra Bank, Bandhan Bank, IDFC FIRST Bank, and Federal Bank's net profit came in below expectations, and the remaining five private banks reported better-than-expected earnings. While most private banks reported a rise in provisions, HDFC Bank and YES Bank saw a fall in provisions, which improved their profits.

 

Credit costs of private sector banks increased in the December quarter. Bandhan Bank's credit cost increased 210 bps on quarter and 160 bps on year to 4.10%, followed by Axis Bank and Kotak Mahindra Bank where the credit cost rose 34 bps and 28 bps on year, respectively. Only HDFC Bank and IndusInd Bank saw a moderation in credit cost on a sequential basis.

 

Private sector banks reported a mixed change in their asset quality. AU Small Finance Bank and Axis Bank saw some seasonal impact in the agri-commodity related business, which led to higher non-performing assets. ICICI Bank, IDFC FIRST Bank, Federal Bank, and YES Bank reported an improvement in their gross non-performing asset ratios. HDFC Bank saw a slight rise in its gross non-performing asset ratio to 1.42% as of Dec. 31 from 1.36% a quarter ago, mainly due to a marginal rise in non-performing assets in commercial and rural banking. The gross non-performing asset ratio of Bandhan Bank was unchanged. 

 

The following table shows the performance of the 17 banks vis-a-vis the consensus estimate for each bank as well as against the consensus estimate for the finance sector and the Nifty 200 index. Three companies for whom estimates were not available are separately given at the end of the table.

 

		Nifty 200 Q3 PAT growth 8.8%	Nifty 200 Q3 PAT growth consensus estimate 10%	PAT sector estimate of 5.2%				Nifty 200 Q3 revenue growth 5.5%	Nifty 200 Q3 revenue growth consensus estimate 4%	NII sector estimate of 7.92%
Company	PAT beat analysts' estimate	Adjusted PAT growth %	Adjusted PAT growth estimate %	PAT beat sector estimate	PAT Beat Nifty 200 estimate		NII beat analysts' estimate	NII growth %	NII growth estimate %	NII beat sector estimate	NII beat Nifty 200 estimate
AU Small Finance Bank	YES	40.83	34.18	YES	YES		NO	52.7	53.5	YES	YES
Axis Bank	NO	3.83	6.13	YES	NO		NO	8.6	10.2	YES	YES
Bandhan Bank	NO	(-) 41.79	2.41	NO	NO		NO	12.1	18.0	YES	YES
Bank of Baroda	YES	5.63	(-)4.37	YES	NO		NO	2.8	7.2	NO	NO
Bank of India	YES	34.62	4.31	YES	YES		NO	11.1	13.4	YES	YES
Canara Bank	YES	12.26	3.69	YES	YES		NO	(-) 2.85	1.1	NO	NO
HDFC Bank	YES	2.22	1.68	NO	NO		YES	7.7	7.5	NO	YES
ICICI Bank	YES	14.81	11.58	YES	YES		NO	9.1	10.4	YES	YES
IDFC FIRST Bank	NO	(-) 52.57	(-) 31.47	NO	NO		NO	14.4	16.2	YES	YES
Indian Bank	YES	34.59	19.90	YES	YES		YES	10.3	8.4	YES	YES
IndusInd Bank	YES	(-) 39.02	(-) 43.11	NO	NO		NO	(-) 1.27	1.9	NO	NO
Kotak Mahindra Bank	NO	9.98	11.29	YES	NO		YES	9.8	9.5	YES	YES
Punjab National Bank	YES	102.82	68.61	YES	YES		NO	7.2	5.2	NO	YES
State Bank of India	YES	3.86	0.95	NO	NO		NO	4.1	6.7	NO	YES
Federal Bank	NO	(-) 5.09	1.60	NO	NO		YES	14.5	13.7	YES	YES
Union Bank of India	YES	28.24	9.69	YES	YES		YES	0.8	0.7	NO	NO
YES Bank	YES	164.53	133.82	YES	YES		NO	10.2	12.4	YES	YES
		EXCLUDED
Bank of Maharashtra	N.A	35.82	N.A.	YES	YES		N.A	19.37	N.A.	YES	YES
IDBI Bank	N.A	30.87	N.A.	YES	YES		N.A.	23.11	N.A.	YES	YES
Indian Overseas Bank	N.A	20.91	N.A.	YES	YES		N.A.	16.32	N.A.	YES	YES

 

End

 

Edited by Akul Nishant Akhoury

 

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