Banks report healthy Q4

Mumbai: Banks reported healthy profits, robust credit growth for the fourth quarter of the financial year. While some banks such as HDFC Bank, ICICI Bank, Yes Bank reported a decline in the Net Interest Margin (NIM) due to rising cost of funds, there were others such as Kotak Bank and State Bank of India that reported an improvement in NIMs.

Credit growth continued to be led by the retail and SME segments with a gradual pickup in corporate lending. Slippages continued to decline. Current account savings account (CASA) continued to deteriorate as people moved their money from savings account to debt and equity mutual funds. This trend has been there for several quarters and it would continue in future as well. Banks also saw some moderation in the unsecured lending segment during the March quarter on account of tightened norms by the Reserve Bank of India along with caution on part of lenders, considering the emergence of stress in certain pockets as seen in the previous quarter.

NIM is a key indicator of a bank’s profitability. SBI’s NIM rose to 3.30 per cent from 3.22 per cent quarter on quarter. Axis Bank’s NIM stood at 4.06 per cent in Q4FY24, up 5bps QoQ. For Kotak Bank, the NIM rose to 5.28 per cent during Q4 of FY 24 versus 5.22 per cent in Q3 of FY24. SBI posted its highest ever net profit of Rs 20698 crore in Q4 and pipped India’s most valuable company Reliance Industries which reported a net profit of Rs 18951 crore during Q4. With sluggish deposit growth being a key point of discussion in the previous quarter (Q3FY24), banks went full throttle to improve deposit mobilization.

However, barring a few banks such as ICICI Bank, IDFC First Bank and RBL Bank, others reported a higher credit growth compared to deposit growth. Anil Gupta, senior vice-president, Co-group head, Financial Sector Ratings at ICRA Ltd said, “The performance of the banking sector continues to remain strong with steady asset quality at lower NPA levels. The banks continued to witness slight moderation in the interest margins but strong loan growth supported the growth in the net interest income as well as operating profits.”

“Growth in the operating profits coupled with continued benign credit cost drove healthy growth in net profits for the banks both on sequential as well as well as yearly basis. The capital position of the banks also continued to remain steady with healthy internal accruals,” added Gupta.

Says Asutosh Mishra, head research, Institutional Equities at Ashika Stock Broking said, “The Q4 earnings were quite good. While a few banks showed a decline in NIM, others reported stable NIMs. Next year guidance is quite good for the sector as a whole. All banks have indicated that the cost of funds have stabilised.”