Comments
Profit growth of public sector banks as a group slowed in FY12 compared with the previous year. This is mainly because they had to set aside more funds to cover loans which increasingly turned sour. Net profit of the 26 PSBs put together grew at a slower clip — 10.3 per cent — in FY12, as against 15.3 per cent in FY11.
Loan quality
The central bank, in its latest macroeconomic and monetary review, has flagged the issue of loan quality deterioration in PSBs, attributing it to deceleration in economic growth and introduction of system-driven identification of bad loans. The slow profit growth of PSBs is reflective of this phenomenon.
In absolute terms, net profit of PSBs in FY12 aggregated Rs 49,513 crore (Rs 44,901 crore in FY11 and Rs 38,948 crore in FY10). Leading the pack in profit growth is India's biggest lender, State Bank of India, with its net profit rising by a robust 42 per cent to Rs 11,707 crore in FY12.
The top five PSBs in terms of percentage growth in net profit are: SBI, followed by Allahabad Bank, Dena Bank and Bank of Maharashtra (31 per cent each); and Syndicate Bank (25 per cent).
The banks which weighed down the overall profit growth of PSBs as a group include: Central Bank of India (net profit down 57 per cent);
State Bank of Travancore (-30 per cent); State Bank of Mysore (-26 per cent); Oriental Bank of Commerce (-24 per cent); and Canara Bank (-18.5 per cent).
PSBs are significant players in the Indian banking landscape, accounting for almost three-fourths of the aggregate deposits and credit in the banking system. The Government is the majority shareholder in these banks.
Rebound likely
Banking analysts say financial performance of these banks, including those which have shown profit de-growth, is likely to rebound as the worst in terms of bad loans is expected to be over by September.
Increased focus on loans to the retail and small and medium enterprise segments, better risk management, loan monitoring and collection, coupled with softer interest rates could help the banks improve their performance.
The pressures points currently facing banks on the bad loans front are from sectors such as steel, aviation, textiles, telecom and State-owned electricity distribution companies.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.