Lower `other income' tells on banks' Q3 profits

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Our Bureau

Chennai, Jan. 31

THE results that have come in from the public sector banks for the third quarter of this fiscal are a mixed bag. Some banks have done well and some haven't.

As a group, the sixteen banks that have announced their results have seen profits slide 21 per cent in the third quarter.

Nine out of the sixteen banks reported sharp dips in profits during the quarter. Two of these banks (Syndicate Bank and Bank of Maharashtra) actually posted losses during this quarter.

Among the big banks, State Bank of India and Punjab National Bank turned in a decent 20 per cent growth in profits. However other large banks such as Canara Bank, Bank of Baroda, and Bank of India reported drops in profits. In fact, if it were not for SBI and PNB, the overall picture would look much bleaker. As a group, the other fourteen would have seen a drop of 44 percent in profits.

The relatively smaller banks such as Allahabad Bank, Andhra Bank, Corporation Bank and Indian Overseas Bank have done well.

The main reason for the slide in profits was the drop in "other income," or profits from treasury activities. The last quarter saw a further hardening of yields in the Government securities market. (Prices of Government securities move inversely in relation to yields) Yields in the benchmark 10-year Government paper were up about 35 basis points in the last quarter.

For some banks, the impact of wage revision following the settlement with bank unions, also created a ripple.

Canara Bank, for instance, had to provide about Rs 150 crore for this purpose and its profits were affected.

For the banking sector as a whole, there was some relief in the pick-up seen in loans, especially from the retail sector. Over one lakh crore of loans has been disbursed during the quarter.

(This article was published in the Business Line print edition dated February 1, 2005)
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