ManagementLow rates help banks post robust growth
Low interest rates helped banks report healthy growth in the third quarter of the current financial year.
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With banks repricing and retiring high-cost debt by taking advantage of abundant liquidity, the rise in net interest income, the difference between interest earnings and outgo, helped them make up for the fall in treasury income.
While HDFC Bank’s bond portfolio was hit by mark-to-market losses due to rise in yields, others such as Axis Bank and IndusInd were not hit as much. IDBI Bank, still in the process of transforming itself into a commercial bank, has a small portfolio of government securities that have to be marked to market.
The improved net interest income provided banks the cushion to step up non-tax provisions to meet the loan-loss coverage ratio target of 70 per cent.
HDFC Bank net jumps 32%
HDFC Bank said its net profit rose 31.65 per cent to Rs 818.50 crore, as control on expenditure and lower provisions helped it offset the fall in income.
While the bank’s total income fell, its net interest income rose 12.4 per cent to Rs 2,224 crore due to an increase in the asset base and an improvement in net interest margins.
Other income, which accounted for more than a quarter of the revenue, however, declined as the country’s second-largest private sector bank took a Rs 26.5-crore hit on its bond portfolio due to rising yields. In the third quarter of 2008-09, it had earned Rs 232 crore through revaluation and sale of investments.
HDFC Bank’s loan book expanded 21 per cent to Rs 119,613 crore from Rs 98,784 crore a year ago. And, with the bank managing to attract low-cost deposits, the net interest margin rose to 4.3 per cent compared with 4.2 per cent a year ago. The share of low-cost current account and savings account (Casa) balances in total deposits was 49 per cent at the end of December 2009 compared with 40 per cent a year ago.
A 15.81 per cent decline in non-tax provisions due to an improvement on the sticky debt front also helped the bank. “The worst is behind us from the non-performing asset formation point of view,” said HDFC Bank Executive Director Paresh Sukhtankar. He said there was a slowdown in incremental bad debt formation, as the economy was performing well and the legacy assets of Centurion Bank of Punjab, which was merged with HDFC Bank last year, had been dealt with. The merger helped the bank keep costs under check, with the result that its operating expenses fell 0.5 per cent.
BOOKMARK
Performance in quarter ended December
(In Rs crore)
HDFC Bank
IDBI Bank
Axis Bank
UCO Bank
IndusInd Bank
2009
% Chg
2009
% Chg
2009
% Chg
2009
% Chg
2009
% Chg
Interest earned
4035
-9.71
4008
23.42
2884
-3.39
2375
11.70
703
12.02
Other income
853
-9.20
426
59.98
988
34.95
234
-23.91
116
-12.81
Total income
4888
-9.62
4433
26.19
3872
4.16
2609
7.20
819
7.68
NII
2224
12.36
719
39.21
1349
45.12
628
39.40
238
103.89
Net profit
819
31.65
287
28.98
656
30.97
246
43.23
88
95.38
Gross NPAs
1974
3.28
2317
44.79
1174
48.95
1483
0.55
258
-2.28
Net NPAs
544
-11.45
1554
60.21
430
25.62
657
-14.75
129
-31.32
% of gross NPAs
1.63
2.07
1.23
2.01
1.34
% of net NPAs
0.50
1.40
0.46
0.89
0.67
Note: Per cent change over Dec 2008 Source : BSE
Axis Bank net profit up 31%
Axis Bank registered 31 per cent rise in net profit to Rs 655.98 core on the back of net interest income, fee income and treasury operations. The country’s third-largest private bank earned Rs 170 crore trading profit despite hardening of bond yields. Its net interest margin rose 50 basis points to 4 per cent.
The bank was aiming for a net interest margin of 3.5 per cent for 2009-10 compared with 3.3 per cent a year ago, Somnath Sengupta, chief financial officer, said. The net interest margin for April-December was 3.63 per cent.
Despite a mere 12.53 per cent loan growth, the net interest income grew 45 per cent to Rs 1,349 crore due to a 208-basis-point fall in cost of deposits.
“The rise in the net interest margin was on account of a rise in the share of demand deposits, reduction in cost of term deposits and the impact of equity issued in September 2009,” said the bank.
The bank’s Casa (low-cost) deposits constituted 45 per cent of the total deposits, up from 38 per cent a year ago. The bank is looking at a Casa of 40 per cent. Its overall deposit growth was only 7.7 per cent.
The bank is expecting an increase in credit offtake. “If the industry’s credit growth is 15 per cent for 2009-10, we hope to do better than that,” Sengupta said.
“Of the various portfolios we have under retail assets, mortgages look very attractive because the real estate market is picking up. There is also an opportunity in passenger vehicles,” he said.
Net and gross non-performing assets rose marginally. “Delinquencies in personal loans and credit cards are plateauing. The incremental portfolio is getting healthier, as we are lending judiciously. Credit quality is under control. We added only Rs 87 crore restructured assets this quarter,” Sengupta said.
The bank increased provisioning for bad loans from Rs 132 crore to Rs 373 crore and, as a result, its provision coverage ratio improved to 69 per cent from 63 per cent in September-end.
IDBI Bank profit rises 29%
IDBI Bank posted 29 per cent rise in net profit to Rs 287 crore as against Rs 223 crore during October-December 2008.
The public sector lender’s net interest income, reflecting revenues from core activity, grew 43 per cent from Rs 503 crore to Rs 719 crore.
The fall in yield on advances was less compared to the sharp dip in cost of funds, which dropped to 7.36 per cent from 9.11 per cent in the corresponding period of 2008-09. The bank’s yield on advances declined to 10.37 per cent from 11.18 per cent a year ago, said Chief Financial Officer P Sitharam.
Fee-based income rose 48 per cent to Rs 350 crore, while gross non-performing assets rose 45 per cent to Rs 2,317.47 crore from Rs 1,600.58 crore a year ago. The bank made Rs 170 crore provisions for slippages in loans to small and medium enterprises and the agriculture sector.
Deposits rose 77 per cent from Rs 80,803 crore to Rs 142,798 crore and advances increased 21 per cent to Rs 111,262 crore compared to Rs 92,192 crore at the end of December 2008. Sitharam said the bank had scaled down its growth estimate to 15-16 per cent from the 22 per cent spelt out at the beginning of the year. The bank’s capital adequacy was 11.54 per cent, as against 11.78 a year ago.
UCO Bank net jumps 43%
UCO Bank has recorded 43.22 per cent growth in net profit to Rs 245.82 crore in the quarter ended December 2009 compared to Rs 172 crore in the third quarter last year.
Its net interest income rose 39.56 per cent to Rs 628 crore.
The share of bulk deposits in the bank’s portfolio has dropped to around 5 per cent. “About 27 per cent of our total deposits at the beginning of the year were bulk deposits. We tried to shed these and made good savings on interest payments,” UCO Bank Chairman and Managing Director SK Goel said.
Although the bank improved its net interest margin, which stood at 2.34 per cent for the quarter, there could be further improvement. “We should be able to reach at least 2.5 per cent by March-end,” he said.
IndusInd Bank net soars 95%
IndusInd Bank reported 95 per cent increase in net profit to Rs 88 crore for the quarter ended December, mainly driven by net interest income and fee income. While the net interest income grew 104 per cent to Rs 237 crore, fee income rose 41 per cent to Rs 111.29 crore.
The growth in the net interest income was mainly due to a 216-basis points decline in cost of deposits, higher than the fall in yield on advances, which was 174 basis points. The loan growth was a healthy 33 per cent, albeit on a lower base. The bank made Rs 10 crore profit from trading in government bonds.
DCB losses mount to Rs 18 crore
Development Credit Bank (DCB) said its losses went up five-and-a-half times to Rs 18.09 crore during the quarter ended December 2009 from Rs 3.23 crore a year ago. The bank’s total income fell 31 per cent to Rs 134.77 crore from Rs 195.16 crore during October-December. Its total expenses fell 26.27 per cent to Rs 126.97 crore. As a result, operating profit fell to Rs 7.80 crore from Rs 22.95 crore last year. The bank, which has been affected by bad debt provisions, saw its non-tax provisions decline 14.69 per cent to Rs 24.80 crore from Rs 29.07 crore a year ago.
SBBJ net drops 32%
State Bank of Bikaner & Jaipur (SBBJ) reported 32.38 per cent decline in net profit to Rs 51.25 crore during the quarter ended December 2009 compared with Rs 75.79 per cent in the corresponding period last year.
While the bank’s total income fell 4.94 per cent to Rs 1,105.65 crore, the fall was largely driven by higher non-tax provisions, which went up 48.91 per cent to Rs 105.42 during from Rs 70.79 crore in the corresponding period last year.