MUMBAI: The banking sector delivered a strong performance in the first quarter of the current fiscal, with most of the banks posting better-than-expected growth in net profit. Higher growth in loans, a decline in bad loans and a jump in interest income helped the lenders to post a healthy net profit in the first quarter of the current fiscal.
The net profit of all listed banks grew by nearly 69% year-on-year to `73,393 crore in the first quarter. The net profit of 12 public sector banks surged by 125% to `34,418 crore in the first quarter while net interest income grew by 26.3% to `99,114 crore. Higher credit growth helped the banks to generate higher income. A sharp recovery in the broader economy has fueled the demand for credit, which grew at 16.2% as of June this year. Also, the consistent decline in gross non-performing assets (GNPAs) has helped the banks to lower the provision for bad loans.
“The profitability of banks has grown due to a growth in net interest income, lower credit costs and improvement in asset quality. The credit growth of the banking sector witnessed a robust growth at 16.2% (as of June this year). The net interest income of banks has increased due to strong credit growth, and rise in yields on advances,” Vijay Singh Gour, Lead Analyst – BFSI Research, Care Ratings told this newspaper. “Contracting pressure on banks’ net interest margins has started to become visible from the first quarter and this pressure is expected to remain on the net interest margins of the lenders for the next one-two quarters. NIMs are expected to stabilise with negative bias after two quarters,” he added.
The high-interest regime helped banks to earn a healthy net interest margin (NIM) during the quarter. Most banks have achieved NIM of over 3% during the quarter. “The banking sector continued to perform well in the first quarter of the current fiscal, with net profits rising significantly compared to the previous year. This was primarily due to double-digit growth in retail loans, which led to an expansion in net interest income,” Palka Arora Chopra, Director, of Master Capital Services, said.
