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Bank results - rushes indicate strong growth

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New private banks post a growth of 30 per cent in profits

N.S. Vageesh

Chennai, Oct. 25

The first clutch of about 20 bank results for the second quarter that have come in present a picture of very robust earnings growth.

The median profit growth is of the order of 36 per cent. The presence of an extraordinary item (non-recurring) either in the second quarter of the current fiscal or in the corresponding quarter in the previous fiscal has caused a sharp deviation from the median figure for many other banks.

A 30 per cent growth in loans during the quarter, re-pricing the loans by roughly 0.50 per cent, a late rally towards the end of the second quarter in the bond market that boosted investment portfolios and reduced need for provisioning, besides the absence of any visible deterioration in asset quality were among the factors that generally boosted bank profits.

The new private banks such as ICICI Bank, HDFC Bank, and UTI Bank have posted a growth of 30 per cent in profits.

This was consistent with their past performance and market expectations. These banks have shown strong retail growth - accumulated more savings bank accounts as well as grown housing, automobiles and personal loans segment.

Old pvt banks

The performance of a couple of old private banks during this quarter looks spectacular at first glance.

However, a significant contributor to their profit growth was the sale of their stake in Bharat Overseas Bank to Indian Overseas Bank. In the case of South Indian Bank, ING Vysya, Bank of Rajasthan, their gain of about Rs 20-25 crore on this account has given their performance a rosy hue.

Among public sector banks, the major ones that have come in so far have been Canara Bank, which reported an 18 per cent growth in profits, and Union Bank that showed a three-fold increase. In the case of Union Bank, the numbers are slightly skewed because of the sharp drop in profits in the corresponding quarter in the previous year.

The bank's treasury profits in that quarter were affected by the provisioning on account of a transfer of government securities of about Rs 7,200 crore from the `Available For Sale' category to `Held to Maturity' category.

The provisioning of Rs 235 crore in the second quarter of fiscal 2006, caused the profits to dip 71 per cent in that quarter.

The lower base for comparison in the current fiscal has made the profits look very good.

The results of a number of other top banks such as SBI, Bank of Baroda, Bank of India, and PNB are awaited later this week.

(This article was published in the Business Line print edition dated October 26, 2006)
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