The banking sector during the first quarter of FY24 showed growth of 16.2 per cent in credit offtake while the outlook for FY24 remained positive, driven by economic expansion, increased capital expenditure, the implementation of the PLI scheme, and a push for retail credit, said a CareEdge report. It added that this growth would be coming off a high base in FY23, which might have a marginal impact on the growth rate.
During Q1FY24, NII of public sector and private sector banks, CareEdge said, grew by 26.7 per cent and 26.3 per cent on-year respectively. “The growth was driven by robust loan growth and higher yields on advances; however, it was partially offset by a rise in the cost of deposits,” it said. NII of Scheduled Commercial Banks (SCBs) grew by 26.5 per cent year-on-year to Rs 1.84 lakh crore in Q1FY24 due to healthy loan growth and a higher yield on advances over the year-ago period.
The NIM of SCBs witnessed on-year improvement of 36 basis points, reaching 3.27 per cent in Q1FY24. “This enhancement can be attributed to the faster repricing of loans, whereas deposit rates have not yet reflected the increased interest rates,” CareEdge report said. Besides, SCBs witnessed higher-than-expected deposit growth in the quarter. The anticipated rise in deposit costs, which is expected to be a lag effect, is likely to put continued pressure on NIM in Q2FY24.
Interest expenses of SCBs rose by 41.8 per cent YoY in Q1FY24, wherein private banks grew by 46.6 per cent and public sector banks by 39.1 per cent in the same period. Deposits for SCBs grew by 13.5 per cent YoY in the quarter, within this PVBs rose by 17.4 per cent YoY while PSBs reported a slower growth at 10.9 per cent YoYin the same period. “The expansion in the cost of funds by 101 bps YoY (from 3.78 per cent to 4.79 per cent) can be attributed to a rise in deposit rates driven by an increase in policy rates along with a reduction in the CASA ratio (low-cost funds). PVBs’ interest expenses increased at a higher pace compared to PSBs due to a higher increase in the mobilisation of deposits,” CareEdge said.
Further, with RBI announcing the withdrawal of Rs 2,000 denomination notes in May 2023, while Rs 3.62 lakh crore notes were in circulation as of March 31, 2023, around 76 per cent of notes have come back into the banking system as of June 30, 2023. This increased the liquidity in the banking system which is likely to reduce the banking sector’s dependence on short-term bulk deposits in the near term.
Going forward, CareEdge estimated that credit growth is likely to be in the range of 13.0- 13.5 per cent for FY24, excluding the impact of the merger of HDFC with HDFC Bank. “Furthermore, as the CD ratio remains elevated, growth in the liability franchise would play a significant role in sustaining loan growth. The competition for deposits is likely to intensify even further, resulting in a rise in funding costs in the coming quarters as rates rise and CASA share reduces. The margin trajectory could witness pressure in the later part of FY24 as competition would also cap the interest rates charged at a certain level,” it said.
Here is a quick look at major banks’ performance during Q1:
State Bank of India (SBI) posted its fiscal first quarter profit at Rs 18,735.95 crore, up 148.9 per cent as against Rs 7528.25 crore during the corresponding quarter of FY23. The NII for Q1FY24 increased by 24.71 per cent on-year to Rs 38,905 crore. SBI’s domestic NIM for Q1FY24 increased by 24 bps on-year to 3.47 per cent.
HDFC Bank posted its fiscal first quarter profit at Rs 12,370.38 crore, up 29.1 per cent as against Rs 9,579.11 crore during Q1FY23. In terms of deposits, HDFC Bank’s total deposits were at Rs 19,13,096 crore during Q1FY24, up 19.2 per cent on-year. CASA deposits grew by 10.7 per cent with savings account deposits at Rs 5,60,604 crore and current account deposits at Rs 2,52,350 crore.
Punjab National Bank (PNB) reported a net profit of Rs 1,342 crore in the quarter ended in June as against Rs 282 crore a year ago. The bank’s asset quality showed improvement with gross NPAs easing to 7.73 per cent of the gross advances by June 2023 from 11.2 per cent a year ago. The net NPA too declined to 1.98 per cent as against 4.26 per cent in the same period of the previous year.
ICICI Bank posted fiscal first quarter profit at Rs 10,636.12 crore, up 44 per cent in comparison to Rs 7,384.53 crore during the same period last year. Net interest income (NII) increased by 38.0 per cent on-year to Rs 18,227 crore in Q1FY24 from Rs 13,210 crore in Q1FY23.
IDFC First Bank posted its fiscal first quarter profit, on a standalone basis, at Rs 765 crore, up 61 per cent in comparison to Rs 474 crore in Q1FY23. The profit growth was driven by strong growth in core operating income. NIM was 6.33 per cent in Q1FY24 as compared to 5.77 per cent in Q1FY23. Core operating income (NII plus fees, excluding trading gains) grew 39 per cent from Rs 3650 crore in Q1FY23 to Rs 5086 crore in Q1FY24.
Federal Bank posted its fiscal first quarter profit for the financial year 2023-24 at Rs 880.12 crore, up 38.8 per cent in comparison to Rs 634.22 crore during the same quarter last year. Its gross NPA during the quarter was at Rs 4610.79 crore, up 7.9 per cent as against Rs 4273.04 crore during the same quarter last year. The net NPA was at Rs 1404.34 crore.