Private sector banks have taken a lead in ploughing back their earnings and boosting their net worth. The growth in book value of private banks outperforms public sector banks (PSBs).
According to a comparison between 17 private sector banks operating in the country and 28 PSBs shows that the net worth of private banks, at an aggregate level, grew 84.8% during FY08. The equity capital increased from Rs 3,193 crore during FY07 to Rs 3,717 crore during FY08. Therefore, the aggregate book-value of 17 private banks increased 40.2% to touch Rs 230.00 in FY08 from Rs 144.83 in FY07.
In contrast, the aggregate net worth of 28 PSBs have increased 25.9% from Rs 1,24,149 crore in FY07 to Rs 1,56,358 crore in FY08. And their equity capital has increased from Rs 11,216 crore to Rs 11,864 crore during the same period. The average book-value of 28 PSBs increased by 19.1% to Rs 131.79 in FY08 from the level of Rs 110.69 in FY07.
R Dogra, deputy managing director, CARE, said that the private sector banks due to their ability to use better technologies, efficient use of resources and diversification into complex business areas like M&A advisory, insurance and AMCs have been able to derive fee-based income. All these lead to higher profitability of private sector banks compared to their public sector counterparts. Private sector banks have also been able to increase their net interest income and profit before tax during FY08 at a faster pace compared to public sector banks.