Q4 scorecard: PSBs continue downslide, private banks shine again

Private banks continued to outshine their public sector peers on both profitability and asset quality, highlighting yet again poor risk management and recovery of the government-owned lenders, analysts said.

Private lenders also fared much better during the January-March quarter when it came to growth in loans and deposits, as also asset recoveries despite weak economy and choking credit demand.

The number of restructured loans and defaulters have also hit record highs, but mostly for the public sector banks.

Balance-sheets of the banks throw up starkly contrasting results. Analysts and some senior public sector bankers blame the poor risk management skills, coupled with unnecessary political interferences in the functioning of state-run banks for the mess they are in.

Industry leader State Bank of India reported 19% fall in profit for the fourth quarter, 2012-13, at Rs 3,299 crore- its first quarterly fall in two years. Others like BoB, PNB and BoI too have reported sharp fall in quarterly profits.

However, private sector rivals ICICI Bank and HDFC Bank continued to post higher profit growth on stable asset quality.

SBI's gross NPA rose to 4.75% during the quarter from 4.44%. Its net interest income declined 4.42% to Rs 11,591 crore, while the net interest margin fell to 3.34%, a decline of 13.2%.

Other PSBs that reported sharp dips in profit include Allahabad Bank, United Bank, IOB, IDBI Bank.

When asked at an event here for his response to the drop in net profit of many public sector banks, Financial Services secretary Rajiv Takru said: "I am not in love with these poor numbers. It is akin to asking someone who got bashed up on the road how he feels about it." An ex-state-run banker told PTI on condition of anonymity: "Public sector banks should be given more freedom in their day-to-day affairs. While incentivisation, which is absent at public sector banks has its negatives, it also helps bankers perform better and more responsibly. All we need is less political interference and more professional freedom." A banking sector analyst concurred saying that while there are many levels of risk management mechanisms at private sector banks, this is in effect absent at most of the public sector ones as there is too much petty politics at the local as well as the national level.

"It is not that private banks are not into rural lending but they have better skills at recovery. And more than a third of the business comes from non-urban centres for most of private banks today," said a banking analyst at a brokerage.

Another analyst said: "Private banks have specific set of people looking after specific work. For instance, there are separate set of people for sales, disbursals, recovery and risk monitoring. But this is something that public sector banks don't have. So investing with specific tasks could be a big beginning for better bottomlines." 

BoB net fell 32% to Rs 1,029 crore as provisions doubled to Rs 1,598.40 crore. Its gross NPAs rose to 2.40% from 1.53%, and net NPAs more than doubled to 1.28 from 0.54%.

Allahabad Bank's Q4 net profit plummeted to Rs 126.15 crore, as against Rs 400.22 crore in the year-ago period; United Bank (Rs 31.18 crore, as against Rs 149.29 crore), Indian Overseas Bank (Rs 58.86 crore versus Rs 528.81 crore), Bank of India (Rs 756.57 crore versus Rs 952.73 crore) and Bank of Baroda (Rs 1,028.85 crore as against Rs 1,518 crore), while Dena Bank's net halved to Rs 125.67 crore due to higher provisioning and contingencies, which rose to Rs 342 crore.

In contrast, private lenders fared better on all the asset quality fronts and especially in profits and lending, while keeping a tight leash on bad assets.

HDFC Bank reported over 30% spike in net profit to Rs 1,889 crore, for the 38th quarter in a row on the back of a 206% rise in net interest income at Rs 4,295.3 crore. Its gross NPAs improved to 0.97% in FY'13 against 1.02% reported in FY'12; net NPA remained at 0.2%.

Similarly, ICICI Bank Q4 net profit jumped over 21% to Rs 2,304 crore on core income growth and an expansion in margins. Its net interest income grew 22% to Rs 3,803 crore, net interest margin rose to 3.3 from 3.01% even though it added Rs 779 crore in gross NPAs.

Axis Bank net rose 22% to Rs 1,555 crore on a 24.2% spike in core income growth to Rs 2,664 crore. This is despite the fact that it saw a three-fold spike in provisions at Rs 595.35 crore from Rs 139.28 crore due to additional Rs 240 crore put into a special contingency fund.

Also, for the three top private banks, their NPAs remained stable with ICICI's net NPA sequentially rising just 1 basis point to 0.77%, Axis Bank and HDFC Bank's net NPAs were flat sequentially at 0.32% and 0.2%, respectively.

However, there were some exceptions amongst the PSBs. The most notable one of the Central Bank of India which had net profit of Rs 169.15 crore, against a net loss of Rs 105.23 crore in Q4 of FY'12. Its provisions came down 48% to Rs 445 crore, while gross NPAs declined to 4.80% from 4.83% and net NPA to 2.90% from 3.09%.

Syndicate Bank nearly doubled its Q4 profit to Rs 592 crore on account of lower provisioning and contingencies. Its net NPAs came down to just 0.76% from 0.96%, while gross NPAs too fell to 1.99% from 2.53%.

Andhra Bank too saw a marginal rise in net to Rs 345 crore, but net NPAs soared to Rs 2,409 crore, while OBC net rose over 16% to Rs 308 crore but mainly driven by increase in non-interest income and recoveries of over Rs 550 crore from technically written-off accounts. Its the NPAs rose to 2.27% from 2.21%.