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N.S. Vageesh

A poor performance from State Bank of India and Punjab National Bank, the top two banks in the public sector domain, has dragged down the overall performance numbers for the sector.

Both these banks registered a mere 2 per cent growth in profits. But for some help from extraordinary income, courtesy its gains on IMD redemption, SBI may have seen its profits drop about 20 per cent.

This is surprising, coming as it does in a year that saw the economy growing 8 per cent, and credit growth spiralling to 30 per cent, and almost no major non- performing assets problem.

Overall, the top 6 banks in the public sector have registered a growth of just 10 per cent.

Private banks

Comparatively, the top private banks such as ICICI Bank, HDFC Bank and UTI Bank managed to register an average profit growth of 30 per cent.

The modest growth in public sector bank profits was mainly because of the 0.5 per cent drop in other income for the group. Treasury profits that contributed handsomely in the past seemed to have taken a hit. Canara Bank's treasury profits were down steeply to Rs 112 crore in 2006 compared to Rs 500 crore in 2005.

Similarly, Union Bank's trading profits fell to Rs 95 crore compared to Rs 260 crore in 2005. For Punjab National Bank treasury profits dropped 40 per cent to Rs 211 crore in 2006.

Cost of deposits for these public sector banks spanned a range of 4.05 per cent to 4.75 per cent, while yield on advances was in a range of 7.18 per cent to 8.18 per cent. Both costs of deposits and yields on advances which have been moving up in the last quarter of last year are likely to go up in the next quarter as banks have hiked interest rates during the last month.

More Stories on : Public Sector Banks | Appraisal

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