Data collated by capital line showed collective net profit of 11 private sector banks fell 9% quarter-on-quarter at the end of the June quarter, despite a 40% rise from the year ago.
Kotak Mahindra Bank and HDFC Bank suffered big losses in treasury income, but ICICI Bank, Federal Bank, and Indusind Bank posted healthy treasury performances.
HDFC’s operating profit rose just 1.5% from the year ago because of higher treasury losses of ₹1,310 crore and 29% rise in opex from the year ago. Kotak bank saw a sequential dip in net profit after taking a mark to market hit of ₹857 crore on its trading book.
Operating profit, excluding mark to market loss, has increased for most private sector banks. Despite a moderation in operating profit, large banks have reported better overall profitability because of lower credit costs. “Overall (private banks reported) good numbers, with asset quality getting better and margins holding up well. Growth outlook remains healthy, which coupled with improving loan yields, as portfolio reprices will help improve sector margins over the coming quarters. Deposit growth for select banks was muted and needs to be focused to support loan growth," said Nitin Aggarwal, banking analyst, Motilal Oswal Securities Ltd.
HDFC Bank and ICICI Bank saw strong growth in advances at around 21%, driven by retail and small and medium enterprises loans. Some reported sequential declines in deposits, which weighed on year-on-year deposit growth. RBL and CSB banks reported muted deposit growth in June quarter. Yes Bank saw a sequential fall in deposits, while Federal Bank reported 1% growth on a month-on-month basis.
The asset qualities of most private banks saw an improvement, which led to a fall in provisions. Indusind Bank posted 30% yoy fall in provisions, with its gross non-performing ratio falling to 2.35% in the June quarter from 2.88% in the year-ago. Only Bandhan Bank saw a spike in GNPA, which rose by 79 bps sequentially to 7.25%.
A large share of slippages in the quarter came from the retail book, where the recovery prospects were better. ICICI Bank saw fresh slippages worth ₹5,825 crore in the first quarter, where retail slippages stood at ₹5,037 crore. “Credit cost has been looking low for large banks, which had a relatively low share of the restructured book, stress in the asset quality. Banks, which faced asset quality stress due to covid, continue to report elevated credit cost," said Anil Gupta, vice-president, Icra.
