41.7% of pvt banks’ profit is fee-based

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FE Research Bureau: In fee-based income (other income), private sector banks continue to outperform PSU banks. A comparison between 10 private sector banks operating in the country and 26 PSU banks shows that private sector banks performed better in terms of fee-based income to total income ratio during 2006-07.

In the case of private sector banks, fee-based income to total income ratio at the aggregate level showed a marginal decrease during 2006-07, against that of 2005-06. In case of PSU banks, fee-based income to total income ratio also showed a decrease but significant. And the ratio was higher in magnitude in private sector banks compared to PSU banks during both the time period.

Ananda Bhoumik, senior director, Fitch Ratings India said, “The drop in ‘other income’ is due to an accounting change whereby amortisation of HTM securities are now debited to this account instead of being added to provisions.

Adjusted for this, PSBs show a growth in ‘other income’, though not as robust as that of private banks, whose fees from the retail business remained very strong.”

The aggregate total income of 10 private sector banks have increased by 51.7% from Rs 33,871 crore in 2005-06, to Rs 51,375 crore in 2006-07.

Their total fee-based income has increased by 41.7% during the study period, lowering the fee based income to total income ratio from 20.0% in 2005-06 to 18.7% in 2006-07. State-run banks, in contrast, appeared less concerned about fee-based income.

It has achieved a 18.2% growth in total income during 2006-07, and the fee based income has decreased by 4.9% to Rs 19,601 crore during 2006-07, from Rs 20,604 crore during 2005-06. And the fee-based income to total income ratio decreased significantly from 13.96% in 2005-06 to 11.24% in 2006-07.

Significant increase in the ratio was seen in the case of Bank Of Maharashtra. The fee based income to total income ratio of Bank Of Maharashtra increased from 2.07% in 2005-06 to 8.87% in 2006-07. In Indian Bank,the ratio increased significantly from 12.10% in 2005-06 to 14.61% in 2006-07.

Largest PSU bank, SBI registered a significant decrease of 22.4% in fee-based income whereas largest private sector bank namely ICICI Bank showed 41.8% increase in fee-based income.