On one parameter, the net interest margins, three private banking majors — HDFC Bank, Axis and ICICI — have performed in three different ways in the fourth quarter. While HDFC Bank managed to maintain it at 4.2 per cent sequentially, Axis Bank saw margins shrink. ICICI Bank has however expanded it from 2.6 per cent in Q2 and Q3 to 2.7 per cent currently. One reason for this is the better-than-expected net interest income that came at Rs 2,510 crore vis-à-vis Rs 2,312 crore in the third quarter.

A larger share of low-cost resources, given the bank's strong retail base, also aided the margins. Its CASA (current account savings account) proportion moved up from 44.2 per cent in the December quarter to 45.1 as of March 2011. The credit-deposit ratio has also improved by a percentage point to 96 per cent in the fourth quarter. Going forward, the bank expects to maintain its margins. Considering the high levels of capital adequacy (19.54 per cent), the strengthening credit growth and high proportion of low-cost deposits, the bank may be able to manage margin pressures better than peers during the current year.

Bettering asset quality

Other positives include the continuation of improvements in asset quality seen over the last few quarters. The gross NPA ratio stood at 4.47 as at the end of the fourth quarter as against 4.75 per cent three months ago. Despite being high, a fall in this ratio, coupled with a rise in provision coverage to 76 per cent (72 per cent earlier), has brought the net NPA ratio down to 1.11 per cent. (1.16 as on December 2010). Provisions also decreased both sequentially and on a year-on-year basis.

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