Andhra Bank, ICICI Bank lead in NPA cut

New Delhi, Aug 16 (UNI) Andhra Bank led all other Scheduled Commercial banks (SCBs) in the cleaning up of balance sheets, as it reduced its Non-Performing Assets (NPAs) by 82 per cent, bringing it to 0.07 per cent in June, 2006, from 0.38 per cent in the same month last year.

Close on the heels of Andhra Bank was ICICI Bank, which reduced its NPA by 60 per cent followed by Corporation Bank 52.17 per cent and Centurion BOP 51.87 per cent, an Assocham Pulse (AEP) study said today.

Improvement in the quality of assets, as reflected in the significant reduction in NPA, contributed mainly to an impressive bottomline posted by the banks for the April-June period of 2006-07.

The AEP study sample included 16 leading banks.

Other banks with significant reduction in NPAs include 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), State Bank of India (31 per cent), Vijaya Bank (12 per cent) and ING Vysya Bank (12 per cent).

''Robust economic growth which led to appreciable improvement in the corporate bottomline enabled banks to scale up their quality of assets. The performance of the banks on this count should also please the RBI which is generally concerned about the quality of assets of the banks,'' Assocham President Anil K Agarwal said.

Commercial banks have also reported a hige growth of 40 per cent in their net profits, following a surge in commercial credit and about 300 basis point rise in the interest rates, the study indicated.

The banks, whose performance was measured in the study included Vijaya Bank, which registered the highest net profit of 163 per cent, Centurion Bank of Punjab (160 per cent), Dena Bank (109 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 each).

The State Bank of India (SBI), the largest commercial bank in India, however, registered a loss of 35 per cent in Q1FY07.

It reported a decline of 35 per cent in the first quarter of the fiscal 2006-07, mainly due to a slowdown in its treasury income and hike in wage costs. 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 the banks rose by 40 per cent.

The increase in net profit margins is mainly on account of the surge in banking business which ensued from expanding credit to the commercial sector.

Bank credit to the same expanded by Rs 40,789 crore during the first quarter of financial year 2006-07, 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 the growing credit, rising interest rates also led 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 combined to push interest rates in the upward direction, including banks not being able to mobilise their resources to meet growing demand for credit; taking global cues, RBI has resorted to raising interest rates as US Federal has hiked interest rates by about 16 times in the past few months.

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