Banks net profit for Q1 FY07 up by 40 per cent

New Delhi, Aug 9: The commercial banks have seen a growth of 40 per cent in their net profits for the first quarter of fiscal 2006-07, following a surge in commercial credit and about 300 basis point rise in the interest rates, a study said today.

The banks whose performance was measured in the study included Vijaya Bank, which registered highest net profit of 163 per cent, Centurion Bank of Punjab (160 per cent), ING Vysya (62 per cent), Yes Bank (50 per cent), Andhra Bank (37 per cent), HDFC (30 per cent), UTI Bank (30 per cent), J&K Bank (29 per cent), Bank of India (21 per cent) and ICICI Bank and Corporation Bank (17 per cent).

However, State Bank of India, the largest commercial bank, reported a decline of 35 per cent in the first quarter of fiscal 2006-07, mainly due to slowdown in its treasury income and hike in wage costs.

The staff cost of SBI rose to Rs 1,924 crore and treasury income went down by Rs 3,606 crore, this fiscal.

It goes to the credit of banks that despite India's largest bank reporting a decline of 35 per cent in net profits, the overall profits of 16 banks, whose results are available so far, rose by 40 per cent.

Improvement in the quality of assets, as reflected in the significant reduction in the non-performing assets (NPA) of the banks also led to an impressive bottomline posted by the banks, 16 of which were taken in the study conducted by Industry body Assocham.

Most of the commercial banks have improved their quality of assets by making a substantial reduction in NPAs ranging between 12 per cent and 81 per cent.

The study further revealed that among the major commercial banks, Andhra Bank topped the list in reducing its NPAs by 82 per cent in the current fiscal. Andhra Bank also took the lead in having lowest amount of NPAs, 0.07 per cent, in first quarter of fiscal 2007.

Other banks with significant reduction in NPAs are ICICI Bank (60 per cent), Corporation Bank (52 per cent), Centurion Bank of Punjab (52 per cent), Union Bank of India (49 per cent), Canara Bank (46 per cent), Bank of India (45 per cent), UTI Bank (39 per cent), Dena Bank (31 per cent), SBI (31 per cent), Vijaya Bank (12 per cent) and ING Vysya Bank (12 per cent).

The increase in net profit margins is mainly on account of surge in bank credit from the commercial sector. The bank credit to the same expanded by Rs 40,789 crore during the first quarter of financial year 2007, higher than that of Rs 26,053 crore during the corresponding period of the previous year.

Non-food credit registered a growth of 32 per cent as on July 7, 2006 as against 31 per cent a year ago.

In addition to growing credit, rising interest rates contributed to an upward trend in net profits of banks. Interest rates have gone up by about 200-300 basis points in the past 12-18 months.

Various factors including, pressure on bank's resources to meet growing credit demand, raising of interest rates by RBI following US Federal which hiked interest rates by about 16 times in the past few months, combined to push interest rates in the upward direction.

On the back of rising credit, banks have witnessed a huge surge in earning interest on advances. In the first quarter of fiscal 2007, aggregate interest on advances of major banks amounted to about 47 per cent, with Centurion Bank of Punjab taking the lead by recording as much as 152 per cent in fiscal 2006-07, followed by UTI Bank (71 per cent), HDFC (70 per cent), ICICI Bank (58 per cent), Corporation Bank (38 per cent) and SBI (38 per cent).

Credit to the housing sector continued to be strong and credit to the commercial real estate increased sharply constituting around 3 per cent of incremental non-food credit.

The hallmark performance of banks related to an impressive growth in retail banking. Dena Bank saw a huge growth of 201 per cent in first quarter of FY 2007.

Others in the pack doing well in this area of lucrative retail banking included Centurion Bank of Punjab (165 per cent), UTI Bank (81 per cent) and ICICI Bank (59 per cent).

UNI