The banking sector delivered a robust performance in the second quarter, with profits of almost all lenders surpassing expectations. Of the 13 major public and private banks, 11 topped profit estimates by analysts polled by Bloomberg. Only two banks reported profits below estimates in Q2. In comparison, eight banks outperformed forecasts last year, while five missed profit estimates.
Among the public sector banks, State Bank of India, Punjab National Bank, Bank of Baroda, Canara Bank beat the estimates. Last year, SBI had missed the estimates.
Among the private lenders, HDFC Bank, ICICI Bank, Axis Bank logged higher profits than estimates while Kotak Mahindra Bank and IndusInd Bank fell short. Last year, Kotak Mahindra Bank, IndusInd Bank, Yes Bank had missed the analysts’ expectations.
Experts say most banks achieved higher deposits growth than advances growth, easing concerns about the sluggish growth in deposits. “Major banks like HDFC Bank, ICICI Bank, Axis Bank, Kotak Mahindra Bank have witnessed higher deposit growth than loan growth in Q2,” a brokerage firm analyst told FE.
“This has given some comfort to investors that banks’ efforts for mobilising deposits have started yielding results,” he added.
HDFC Bank reported a 5.1% quarter-on-quarter growth in deposits and a 1.3% growth in advances. Similarly, ICICI Bank deposits grew 5% and loans by 4.4%, Axis Bank increased deposits by 2.3% and loans by 2%, while Kotak Mahindra Bank grew deposits by 3.2% and advances by 2.5% in the second quarter.
Higher non-interest income, improved recovery from bad loans, lower provisioning costs and improvement in asset quality have also helped lenders to post better-than-expected net profit. Most of the public and private sector banks have reported decline in gross non-performing assets (NPAs) in the second quarter, showing improvement in their asset quality.
“The non-interest income of public sector banks increased and saw robust growth of 56.8% driven by mark-to-market gains seen by banks followed by strong growth in fee income,” said Sanjay Agarwal senior director, CARE Ratings. “The treasury income as a percentage of total assets for select banks witnessed an uptick of 14 basis points from 0.07% in second quarter in FY24 to 0.21% in second quarter of FY25,” he said.