Eight banks reported robust growth in treasury income or trading gains in the fourth quarter of FY24 as yields on government securities eased.
The banks that reported treasury gains or income are Bank of Maharashtra, Equitas Small Finance Bank, Kotak Mahindra Bank, AU Small Finance Bank, Yes Bank, Axis Bank, South Indian Bank, and Central Bank of India, an analysis showed.
Yields on government securities, especially the 10-year benchmark, fell about 14 basis points (bps) during the fourth quarter of FY24, as per Bloomberg data. However, the Indian rupee remained volatile and fell 8-9 paise in the same period.
Bond yields eased due to heavy inflows by foreign investors after JPMorgan said last year that Indian bonds would be included in its Government Bond Index-Emerging Markets starting June 28, 2024.
“On a quarter-on-quarter basis, Indian tenure is centred lower and closed just above the 7 percent mark as the US rate-cut expectations and anticipation of inclusion of Indian bonds in the global index triggered a risk on rally in India bonds,” Natarajan M, president & head of treasury at Equitas Small Finance Bank, said during an earnings conference call.
The numbers
Yes Bank reported investment gains and treasury income of Rs 15 crore in the January-March quarter compared with a Rs 97 crore loss a year earlier.
Puneet Sharma, chief financial officer of Axis Bank, said the lender had trading profit and other income of about Rs 1,128 crore, an addition of Rs 743 crore sequentially.
“A large part of that gain has come through our debt capital market, our treasury trading performance and MTM (mark to market), a reasonable size reversal of MTM losses booked in the last quarter,” Sharma added.
South Indian Bank’s income from treasury and forex stood at Rs 80 crore in Q4 compared with a loss of Rs 50 crore in Q4 of FY23, as per the bank’s investor presentation.
Treasury income of the Central Bank of India grew to Rs 365 crore in Q4 from Rs 128 crore a year earlier.
AU Small Finance Bank’s treasury income stood at Rs 7 crore in Q4, as against Rs 1 crore in Q4 of FY23.
Equitas Small Finance Bank, Kotak Mahindra Bank, and Bank of Maharashtra reported treasury gains of Rs 27 crore, Rs 138 crore, and Rs 149 crore, respectively.
Also read: Banks report robust gold loan growth amidst regulatory tension
Yield movement
The yield on the 10-year benchmark bond fell to 7.056 percent on March 28, 2024, from 7.197 percent on January 1, 2024, as per Bloomberg data. The sharp movement came on high inflows by foreign investors in Indian bonds and an increase in domestic investor demand.
Demand for Indian bonds from foreign investors increased sharply after JPMorgan's bond inclusion announcement in September last year. Since last November, monthly investments by these entities in the Indian debt market have remained above Rs 10,000 crore.
Apart from this, investments by these entities in Indian government securities through the Fully Accessible Route (FAR) also surged by over 100 percent since the announcement. FAR enables non-residents to invest in specified government dated securities without any investment ceiling.
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