Higher fees and commissions, income from foreign exchange transactions and recovery from written off assets have helped major private sector banks post higher growth in non-interest income or fee income during the fourth quarter.

Among the banks that have declared results so far, HDFC Bank and Axis Bank have both seen their fee income grow at a faster pace than interest income.

For Axis Bank, the growth in fee income has been very strong, said Mr Somnath Sengupta, Executive Director, while announcing the bank's quarterly results.

Fee income grew by 58 per cent to Rs 1,231 crore during Q4 FY11, compared to Rs 780 crore in Q4 FY10, with contributions from all major segments. As against this, net interest income grew by 17 per cent to Rs 1,701 crore.

Fee income from large and mid corporate credit grew 68 per cent, followed by treasury which rose 79 per cent and retail business which grew 45 per cent.

A report by Standard Chartered Bank said Axis Bank's growth was higher than expected, driven by stronger than expected foreign exchange income and higher than expected recoveries in written off accounts. This compensated for the lower than expected growth in net interest income.

Recoveries from written-off accounts contributed Rs 155 crore during the fourth quarter, said a report by Angel Broking.

For HDFC Bank, other income for the quarter ended March 31, 2011, was Rs 1,256 crore (Rs 951 crore) up 32 per cent over the previous year. As against this, net interest income increased by 21 per cent to Rs 2,839.5 crore (Rs 2,351 crore).

Main contributors

The main contributor to the other income was fees and commissions of Rs 1,001 crore (Rs 812 crore), up by 23.2 per cent. The other major components of other income were foreign exchange and derivatives revenue of Rs 245 crore (Rs 180 crore) and profit of Rs 8.6 crore on revaluation/sale of investments (loss of Rs 47.3 crore).

For IndusInd Bank, core fee income grew to Rs 165 crore (Rs 112 crore), an increase of 47 per cent. Against this, net interest income grew to Rs 388 crore (Rs 273 crore), an increase of 42 per cent.

For the current year the bank has stated “fee growth to exceed loan growth and increased focus on (new) fee enhancers” as one of its objectives.

It is banking on initiatives such as currency chests, investment banking, credit card and its proposed venture of originating and marketing mortgages to see higher growth in fee.

“Fee income should be about 35 per cent of our total income,” said Mr Romesh Sobti, Managing Director and CEO, IndusInd Bank.

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