Lower bad loans and a jump in interest income have helped Indian banks log good earnings in Q1FY24.
Moneycontrol analysis of bank earnings in this quarter showed that they have recorded a major improvement in overall asset quality, indicating an improvement in the real economic conditions on the ground.
In the April-June quarter of FY24, banks reported 30-100 percent growth in net profit, which is almost in line with or above the estimates of brokerage firms.
Among the top banks, HDFC Bank reported a net profit of Rs 11,951 crore for the April-June quarter -- a jump from Rs 9,196 crore in the year-ago period. Kotak Mahindra Bank’s net profit rose 50.62 percent year on year (YoY) to Rs 4,150.19 crore. Similarly, Union Bank of India and Canara Bank registered over 100 percent and 74.8 percent rise, respectively, in their net profit in Q1FY24.
Robust NII growth
For the quarter, public sector lender Union Bank of India reported a 16.59 percent YoY jump in net interest income (NII). NII is the difference between the interest earned on loans and paid to depositors. The lender’s NII increased to Rs 8,840 crore from Rs 7,582 crore last year.
Canara Bank’s NII improved to 27.72 percent on-year to Rs 8,666 crore from Rs 6,785 crore last year.
Central Bank of India’s NII grew by 48.27 percent to Rs 3,176 crore in Q1FY24 from Rs 2,142 crore in Q1FY23.
Among private banks, the country's largest, HDFC Bank’s NII grew by double figures to 21 percent. For the April-June FY24 quarter, the NII of the lender stood at Rs 23,599 crore, from Rs 19,481 crore for the quarter ended June 30, 2023.
Kolkata-based Bandhan Bank, which reported a 19 percent YoY fall in net profit, reported a marginal dip in NII. The lender’s NII for the quarter stood at Rs 2,490 crore, marginally falling from Rs 2,510 crore from last year.
For IndusInd Bank, the NII grew by 18 percent to Rs 5,863 crore, compared to Rs 4,125 crore in the corresponding quarter of the previous fiscal.
The country’s second-largest private sector lender, ICICI Bank, reported a 38 percent jump in NII. The bank’s NII for the April-June FY24 quarter stood at Rs 18,227 crore, compared to Rs 13,210 crore last year.
Kotak Mahindra Bank’s NII grew 32.7 percent on-year to Rs 6,234 crore, from Rs 4,697 crore.
Mumbai-based IDBI Bank’s NII stood at Rs 3,998 crore, growing by 61 percent YoY from Rs 2,448 crore.
Also read: Banks’ gold loan portfolios get boost in April-June quarter from high yellow metal prices
Betting big on retail loans
Most banks which reported their results have seen a sharp rise in retail loans. The rise was between 12 percent and 50 percent across banks.
IndusInd Bank’s other retail loans rose 50.4 percent on-year to Rs 17,829 crore in April-June FY24, and Central Bank of India’s retail loan book rose 17.11 percent on-year to Rs 63,641 crore.
Similarly, ICICI Bank reported 21.9 percent on-year growth in retail loans to Rs 5.83 lakh crore, IDBI Bank’s retail loan book rose 12.6 percent on-year to Rs 1.13 lakh crore, and Union Bank of India registered 16.47 percent on-year growth to Rs 1.62 lakh crore in retail loans.
Other banks, such as HDFC Bank, Canara Bank, and Bandhan Bank, also reported healthy growth in retail loans.
Healthy asset quality
Union Bank, in the April-June FY24 quarter, reported an improvement in asset quality. The gross non-performing asset (GNPA) of the bank fell to 7.34 percent, as on June 30, compared to 7.53 percent in the previous quarter, and 10.22 percent in the year-ago period.
Similarly, the net NPA (NNPA) of the bank decreased to 1.58 percent in the April-June quarter of FY24, as against 1.70 percent in the corresponding quarter a year ago.
The Bengaluru-headquartered Canara Bank’s asset quality improved in Q1FY24, with the GNPA ratio at 5.15 percent against 5.35 percent in the previous quarter and 6.98 percent in the year-ago period. The NNPA ratio stood at 1.57 percent, better than 2.48 percent in the year-ago period.
Central Bank of India's GNPA improved to 4.95 percent from 8.44 percent last year. The lender's NNPA stood at 1.75 percent, improving from 1.77 percent in the corresponding quarter last year.
Among private sector lenders, HDFC Bank’s GNPA ratio stood at 1.17 percent, improving from 1.28 percent in the corresponding period a year ago. Its NNPA stood at 0.30 percent from 0.35 percent last year. The lender's net profit jumped from Rs 9,196 crore in the corresponding quarter last year to Rs 11,951 crore in Q1FY24.
Bandhan Bank reported a healthy GNPA from 7.25 percent last year to 6.76 percent in the April-June FY24 quarter. The lender’s NNPA stood at 2.18 percent, rising from 1.92 percent in the corresponding quarter last year.
IndusInd Bank's gross non-performing asset (NPA) stood at 1.94 percent, down from 2.35 percent recorded in the same quarter last year. On the other hand, net NPA of IndusInd Bank for the quarter stood at 0.58 percent, improving from 0.67 percent on a year-on-year basis.
ICICI Bank’s GNPA stood at 2.76 percent from 3.41 percent and NNPA stood at 0.48 percent from 0.70 percent.
Kotak Mahindra Bank’ asset quality showed healthy growth, with the GNPA falling 1 basis point sequentially to 1.77 percent, and net NPA rising 3 bps to 0.40 percent.
IDBI Bank’s GNPA declined to 5 percent compared to 20 percent last year. The NNPA of the bank fell to 0.44 percent, compared with 1.26 percent in last year.
Also read: Banks’ aggressive lending to farm sector under El Nino cloud; experts warn of rise in NPAs
Treasury investment
Some banks have increased their investments in securities that fall under Statutory Liquidity Ratio (SLR) and non-SLR categories and also registered treasury gains in the first quarter of the financial year 2024.
For instance, Union Bank of India increased its investment by 1.85 percent to Rs 3.49 lakh crore in the April-June quarter of FY25, and IDBI Bank’s treasury investment rose 22.4 percent on-year to Rs 1.08 lakh crore.
Similarly, Canara Bank’s treasury investment rose 7.30 percent to Rs 3.36 lakh crore.
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