Boosted by a four-fold jump in treasury bond gains, India's top 12 banks clocked a 55.2 per cent jump in net profits in the quarter ended 30 June, but the high cost of funds hit their net interest margins, rating agency Credit Analysis & Research Ltd (CARE) said in a report.
Aggregate net profits of the top banks zoomed to Rs8,175.6 crore in the quarter, as compared to Rs5,266.7 crore in the year-ago period, with treasury gains accounting for 11.6 per cent of the operating income, the report said.
However, the higher cost of funds and lower lending rates brought down net interest margin of the banks in the quarter due to subdued growth in the net interest income. Given that a substantial portion of deposits were mobilised in the second and third quarters of FY 09, the interest outgo on these deposits remained high during the last quarter, CARE said.
In the face of the economic slowdown, banks' provisions for non-performing assets rose 3.5 times in the quarter over the same period in the previous year. However, the banks could report lower provisioning during the quarter due to change in secondary market conditions, the report said.
"Due to improvement in secondary market conditions, depreciation on investments was written back during the quarter, helping banks to lower total provisioning cost," it said.
The year-on-year credit growth of top banks fell to 15.1 per cent for the period ended June 2009, the lowest level since March 2004. Also, the top 12 lenders restructured loans worth Rs32,530 crore in the first quarter of the current fiscal, taking the total restructured assets to nearly Rs73,000 crore, with public-sector banks taking the lead.
However, the proportion of total restructured advances to total loans remained within a comfortable level of 4 per cent, the report added.
The top 12 lenders - State Bank of India, Bank of Baroda, Bank of India, Canara Bank, Axis Bank, HDFC Bank, ICICI Bank, IDBI Bank, Central Bank of India, Punjab National Bank, Union Bank of India and Syndicate Bank - account for 61 per cent of bank credit in India.