Public sector banks (PSBs) have registered higher return on assets (RoAs) as compared to their private counterparts during 2009-10. This was revealed by a comparative study of RoAs of 13 private sector banks and 25 PSBs during 2009-10 and 2008-09.
RoA indicates how profitable a bank is with regard to its total assets and also gives an idea how efficiently capital has been deployed to generate earnings.
In 2009-10, profit after tax (PAT) as a percentage of total assets (which indicates RoAs), for PSBs fell to 0.98% from 1.02% recorded in 2008-09.
The highest fall in the ratio was in the case of Bank of India, where it decreased from 1.50% to 0.65%. For Canara Bank, the decrease was from 1.47% to 0.87%. State Bank of India, the country?s largest bank, logged an RoA of 1.10% in 2008-09 which declined to 0.69% by 2009-10.
Decrease in ROA of BoI can be attributed to its lower profit.
During 2009-10, BoI posted a net profit of Rs 1,741 crore compared to Rs 3,007 crore during 2008-09. The bank?s decline in profit was due to pressure on margins, resulting out of high cost of deposits for the initial period and slow growth in other income.
In 2008-09, Dhanalakshmi Bank had a ratio of 1.87% followed by Axis Bank with 1.68% and Yes Bank with 1.50%. But in 2009-10, Axis Bank had the highest RoA of 1.85% followed by Yes Bank with 1.70% and HDFC Bank with 1.50%.
Axis Bank and Yes Bank are placed among the top three during both the years. Asset growth in case of Yes Bank was higher than growth of net profit during 2009-10. Yes Bank?s net profit increased 57.2% against 58.9% growth in assets.
The asset growth of Axis Bank was lower than its profit growth.The bank?s net profit growth was 38.5% during 2009-10 against 22.3% growth in assets.
Among the 13 private banks, four banks, namely Dhanalakshmi Bank, Federal Bank, Karnataka Bank and South Indian Bank showed a decline in RoA during 2009-10.
