Amongst the larger private banks, ICICI Bank and HDFC Bank led the earnings growth posting 30% year-on-year (yoy) growth, while Axis Bank grew at a more moderate 23% yoy. IndusInd Bank and YES Bank continued to post good earnings growth at around 30% yoy. Like in the previous quarter, Kotak Mahindra Bank remained the laggard with an 8% yoy growth, on the back of higher provisions.
The net interest margins (NIMs) of the banks remained robust with YES Bank and Axis Bank expanding NIMs by 10 basis points (bps) and 9 bps respectively. The NIMs for ICICI Bank came in flat at 3% quarter-on-quarter (qoq). ICICI Bank has clearly broken out of the NIM range of 2.4-2.6% to the 3% level in the last three quarters, helped by steady improvement in both domestic and international margins, said a Nomura report.
IndusInd Bank saw its cost of funds fall by 7 bps that enabled it to expand NIMs by 3 bps in the quarter. The YES Bank management said that given the current liquidity and interest rate scenario NIMs are expected to improve further by 10bps for the next two quarters.
Unlike the public sector banks, the asset quality of private banks has not deteriorated significantly. HDFC Bank, Axis Bank and IndusInd Bank saw their net non-performing asset (NPA) levels remaining flat in the quarter. A Morgan Stanley report noted that for HDFC Bank the net new NPL formation for the quarter was lower in the July-September quarter at Rs1,600 crore, compared to Rs 2,200 crore in the previous quarter.
ICICI's restructured book showed a net decline of Rs 14 crore during the quarter, and the management indicated a further Rs 500 of loans in the pipeline for restructuring. The restructured book forms about 1.5% of the bank's advances. The Axis Bank management reiterated its guidance of total loan impairment of Rs1,000 crore per quarter for the rest of FY13. A Motilal Oswal report points that the gross NPAs (incl. stressed assets) of Kotak Mahindra Bankincreased 8% qoq as the bank acquired an Rs 49 crore worth stressed asset portfolio during the quarter.
The net interest income (NII) for private banks was boosted by strong loan growth. Axis Bank reported a loan growth of 23% yoy, driven by a robust retail loan growth of 51% yoy. Outside of retail loans, agri loans and international loans dragged down the overall loan growth. On the corporate loan front, non-power infra was the only sector that had a sequential growth. In the case of HDFC Bank the strong retail loan growth resulted in the loan mix shifting towards the retail segment, which now stands at 53%.
The IndusInd Bank management said that they are seeing strong loan growth in the mid / small size corporates and commercial vehicle segment, and has guided for 30% growth for the rest of this fiscal. The Kotak Mahindra Bank management maintained its guidance of 20%+ loan growth in the current fiscal. ICICI Bank expects corporate loan growth of 20% and retail loan growth of 15% for this financial year.