Public sector banks’ (PSBs) profitability would remain strong this fiscal as well with the aggregate profits in all likelihood expected to exceed the record ₹1-lakh crore recorded last fiscal, say analysts and banking sector experts.

“We think absolute expansion will be there because the loan book growth we are again expecting it to grow. So, the expansion of the loan book will translate into higher operating profits despite lower net margin and that will flow into bottomline,” Anil Gupta, Senior Vice-President & Co Group Head—Financial Sector Ratings, ICRA Ltd, told businessline when asked if PSBs are expected to better last fiscal’s performance on the bottomline front.

Credit expansion till August 11 this fiscal stood at ₹5.8-lakh crore, substantially higher than ₹3.7-lakh crore in the same period last fiscal.

Last fiscal, the 12 PSBs in aggregate recorded a net profit of ₹1,04,649 crore, up 57 per cent over net profit of ₹66,539 crore in 2021-22.

Rahul Malani, Deputy VP Research, Sharekhan by BNP Paribas, said: “Yes, profitability would be higher for PSB in FY24 led by healthy loan growth, strong recoveries and sustained lower credit cost. NIMs are expected to be lower marginally/ broadly stable compared to FY23. 

“Also last year they had large treasury losses in H1FY23 due to upwards movement of bond yields but some of the losses were recouped in H2FY23 due to downward movement of bond yield. So, this year treasury income would be higher led by further lower bond yields.”

Srinath Sridharan, Policy Researcher & Markets commentator, said that the year-to-date bank disbursements have been higher than previous fiscal. Also, the aggregate growth across consumer segments and credit offtake is good. This is despite oscillating inflationary concerns, increase in interest rates, monsoon fluctuations, he said.

“This gives positivity of banking volumes for FY23-24 being large growth from previous fiscal, but for any large unseen event before March 24. Seen with the filter of reduced NPAs across banking, and banks able to hold onto their pricing power, it means higher profitability as well, as long as their costs are controlled,” Sridharan said.