The Hindu Business Line : Fee income beefs up banks’ Q1 bottomline

In the case of larger banks, a good international presence helped improve fee income. In the case of mid-sized banks, it was due to reasons such as full leveraging of their core banking platforms, better product suite and reorientation of staff towards pushing fee-based products which helped, said banking analysts.

Banks such as State Bank of India, Bank of India, Bank of Baroda, ICICI Bank, HDFC Bank and Axis Bank have reported over 30 per cent growth in fee income in the quarter ended June 30, 2008.

“Going ahead, we would like more fee-based income to take care of the shortfalls in interest margins,” Mr T. S. Narayanasami, Chairman and Managing Director, Bank of India, said.

Processing fee hike

State Bank of India also has plans of hiking the processing fees on loans, which according to the bank are among the lowest.

Similarly, ICICI Bank’s plans to increase fee income include increasing its share of current accounts and improving the business banking services, according to senior officials from the bank.

According to Mr Suresh Ganapathy, Research Analyst, Deutsche Bank, banks such as SBI, ICICI, Bank of Baroda and Bank of India are able to generate high fee income because of their good international presence.

“Income from international operations is fee-oriented because of services such as syndication and advisory and structured products. These are large banks with good international presence,” he said.

However, in the first quarter, not just the big banks, even the mid-sized banks had done surprisingly well in fee income because of the level of technology and product suite, he added.

Trend to continue

The trend will continue going ahead, Mr Ganapathy said, because in the current market, the net interest income for most banks will be under pressure.

However, according to Mr Vaibhav Agarwal, analyst with Angel Broking, the growth in fee income has been reasonably strong for private banks, but in the case of public sector banks it is more-or-less in line with past trends.

“Most PSU banks have fee income from traditional sources such as bill discounting, letters of guarantee, etc, which will grow as the balance sheet grows. But it is the private banks that are focusing on the really sophisticated sources of fee income such as complex treasury products, investment banking and advanced cash management solutions,” he said.

He also added that fee income related to capital market could see a slowdown given the general slump in the equities market.