The Hindu Business Line : Banks perform well in first quarter

Unlike in the past when high profits likely were of an extraordinary or one-time nature, the profits this time seem more stable and balanced between interest income and other income.

The effect of robust loan growth over last year was seen in the strong growth in interest income of all banks.

For public sector banks, the interest income component grew 34 per cent while for private banks it was higher at 52 per cent.

This was also matched by the growth in “other income” which usually comprises earnings from commission, exchange brokerage, profit on sale of land or buildings or other assets, revaluation of investments, income earned from subsidiaries, etc.

For private banks, this component grew by a significant 66 per cent while for public sector banks it was a relatively modest 23 per cent. For most banks, their net interest margin, or the ratio of net interest income to interest earning assets, showed a slight improvement over the corresponding quarter of the previous year.

This implied that they have managed to pass on the rising deposit costs to their borrowers. Costs of funds for most banks have risen by at least one percentage point in this quarter.

Net interest margins have on the average been around 3 per cent.

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