Public sector banks (PSBs) while going in for an overall re-branding and repositioning exercise, have also translated the zest into their books. A study carried out by FE shows the overall profitability of PSBs in the third quarter of the current fiscal and their asset quality during the same period is much better than their private sector peers.
The study, which looked at 25 PSBs and 17 private sector banks during Q3, saw the net interest income (NII) of PSBs grow by a whopping 40.2% over the same period of the last fiscal, while the NII of private sector banks grew by just about 22.8%.
This growth in NII helped PSBs record a 49% growth in net earnings, while private sector banks registered a 24.4% net profit growth during the period of comparison. ?Healthy credit off-take in non-food credit helped PSBs increase NII significantly during the third quarter,? said an analyst from a Mumbai-based brokerage house. Among PSBs, the significant increase in NII was seen by IDBI Bank ? an increase from Rs 220 crore to Rs 516 crore. This was possible by containing the cost of deposits as well as their deployment in high-yielding advances. The interest income of IDBI Bank rose 55.8% during Oct-Dec 2008. On the other hand, total interest expended increased 46.5% during the same period.
Moreover, PSBs seem to have improved their asset quality, while private sector banks witnessed deterioration. The growth of sticky loans of private banks was higher, compared to PSBs during Q308. The net non-performing assets (NNPAs) of 16 private banks increased 41.9% during Oct-Dec 2008, against 15.2% for 25 PSBs. The gross non-performing assets (GNPA) of private banks increased 39.3%, against a marginal increase of 5.3% in case of PSBs. Among PSBs highest decline in GNPA was registered by State Bank of Indore, followed by Punjab National Bank.
Importantly, the average NNPAs to net advances ratio of 25 PSBs decreased from 0.84% in Oct-Dec 2007 to 0.75% in Oct-Dec 2008. But for private banks, the ratio increased from 0.87% to 1.14% during the period.
?The aggressive stance of targeting retail advances seems to have caught the private sector banks unaware. Most of the delinquencies have been in the area of personal loans and auto loans,? reckons a fund manager with an Indian mutual fund.