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N.S. Vageesh

Chennai, May 1 The fourth quarter of the last fiscal was a relatively lacklustre one for public sector banks.

For the 14 banks that have released their numbers, there has been an 11 per cent growth in profits.

The picture might have been much worse but for the much higher profits posted by a few banks such as Bank of India and Corporation Bank.

Lack of pricing power or the inability to pass on higher costs was visible.

Interest expenses for the group were higher than their interest income.

The net interest income of these 14 banks (interest income less interest expenditure), dropped 3 per cent compared to the corresponding quarter in the previous year. Only Bank of India seemed to show robust growth in this parameter.

This year has seen a see-saw of sorts in profit performance of public sector banks across four quarters. In the first quarter, public sector banks posted a 40 per cent growth followed by a deceleration to about 20 per cent in the second quarter. That was followed by a pick-up in the third quarter at about 40 per cent before slowing down once again.

The contribution of other income in the fourth quarter was significant with a growth of 19 per cent, although it was at a lower level when compared to the third quarter. In this quarter, banks were hit by a double whammy – equity prices crashed as did bond prices. In the preceding quarter, these banks had gained on these counts significantly.

Andhra Bank had to provide for a Rs 200-crore hit on its equity portfolio, while Indian Overseas Bank had to provide for Rs 150 crore on this account.

This time the gains in other income were on account of better recoveries of written-off assets in the last quarter (as in the case of Indian Overseas Bank) as well as income from sale of property, securities, etc (as for instance in the case of Dena Bank).

Simultaneously, a number of banks also had to absorb higher costs or losses.

In the case of Central Bank of India, there was a pick-up of high-cost deposits in the last quarter while also providing for the requirements of Accounting Standard – 15. Oriental Bank of Commerce chose to absorb the full losses of Global Trust Bank (which it had taken over) a full year ahead of schedule.

Comparatively, private banks such as Axis Bank, ICICI Bank, Yes Bank and HDFC Bank have posted better-than-expected results with their profits showing a 45 per cent growth in this quarter. The derivatives controversy has so far not dented any bank balance sheets.

More Stories on : Public Sector Banks | Financial Performance

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