Public sector lenders have not lost ground to their private sector peers in terms of net profit alone.
Public sector lenders have not lost ground to their private sector peers in terms of net profit alone. In fact, state-owned banks’ share in aggregate operating profit of the banking industry has dropped as well — by 199 basis points — in FY15.
Capitaline data showed that public sector banks generated 66.32% of the total operating profit of 38 banks in FY15, down from 68.31% in the previous year.
While public sector banks argue that their profits were hit primarily because of provisions towards bad loans, data show they are losing out to private peers on an operating profit level too. State-owned banks have said their exposure to infrastructure, power and steel sectors were the reasons behind the rise in bad loans and subsequent rise in provisions.
For instance, the operating profit of Punjab National Bank — the third largest public sector bank — grew 5% in FY15 to R11,955 crore. This compares with 19% growth in operating income of ICICI Bank to R16,594 crore and a 21% growth seen by HDFC Bank to R17,404 crore in the same period.
FE recently reported that profits of 13 private sector banks for FY15 have outstripped the combined profits of 25 public sector banks. While private lenders have reported a total standalone profit after tax of R37,361 crore, the state-owned banks earned R36,349 crore, data from Capitaline showed.
Public sector banks earned R2,312 crore more than private banks in FY14. However, private banks have stolen the lead in FY15, with PSBs weighed down by higher provisioning owing to the larger share of non-performing assets — 90% of the banking system NPAs.
Total provisions made by private banks stood at R10,852 crore while public sector lenders have had to set aside R77,787 crore.