Private sector banks’ profits jump  on  faster credit  growth

According to data for 13 private sector banks provided by Capital Line, net interest income, or the difference between interest earned and expended, grew 11% from a year earlier and 2.5% sequentially.

Loan growth was strong for most banks on a sequential basis, led by retail loans and those against properties. Kotak Mahindra Bank surprised investors with a 14.7% growth in the loan book in the September quarter from a year ago and 8% sequentially, led by its mortgage book. Home loans, along with loans against property, now constitute close to 26% of Kotak’s overall loan book after the bank cut home loans rate to 6.5%. Loans sourced digitally doubled from the June quarter.

ICICI Bank posted a 19% growth in its domestic loan portfolio from the September quarter of the previous fiscal. “With the increase in economic activity, disbursements across retail products increased sequentially in this quarter. Mortgage disbursements were close to the level seen in Q4 of 2021, reflecting the increase in demand coupled with our seamless customer onboarding experience through pre-approved offers and digitization,” Sandeep Bakshi, managing director and chief executive of ICICI Bank, said in a call with investors.

Excluding Bandhan Bank, private banks reported a 31% sequential drop in provisions as asset quality remained under control. Total gross non-performing assets of these banks grew 1.5% on a year-on-year basis but fell 3.7% on a sequential basis. Banks with higher exposure to microfinance portfolios saw a spike in fresh bad loans. Indusind Bank reported ₹2,660 crore of slippages, with 40% of it coming from its microfinance loan book alone.

HDFC Bank had the highest share in restructuring among private lenders at ₹17,395 crore, followed by Yes Bank at ₹6,184 crore and ICICI Bank at ₹4,156 crore. What is worrying is that HDFC Bank saw many write-offs and slippages from the first restructured loan pile. As a result, restructured loans have risen to 1.35% of the total book from 0.8% in the previous quarter. Nearly 80% of the fresh restructuring has been from retail loans. “The bank did take a proactive and empathetic stance in this as well, and we have extended this regulatory lead for several affected customers. We have carried out a similar exercise of monitoring this particular portfolio and the potential risk that could be estimated. And this was determined through our ongoing analytics on all these borrowers, their pre- and post-restructuring behaviour, inputs from other data sources, their banking account performance and, again, bureau sources. Our assessment of this particular portfolio, using this methodology, indicates a peak potential impact of 10 basis points (bps) to 20 bps at any point in time,” said Jimmy Tata, head, credit and market risk, HDFC Bank.

Bandhan Bank was an exception as it reported a massive loss of ₹3,000 crore on higher provisioning. Asset quality deteriorated with gross non-performing increasing to 10.8% mainly on account of the microfinance loan book. Its restructured pool also inched up to 11% of loans against 6% in the previous quarter. While overall collection efficiency improved to 94%, that in the microfinance loan book in major stressed states of Bengal and Assam was disappointing.

“ Banking sector results are a mixed bag. Few large banks have delivered on loan growth along with healthy growth in NII. Higher opex impacted operating performance of many banks. Credit cost across the line has declined q-o-q despite slippages remaining elevated and thus helping them deliver healthy growth in bottom line”, said Asutosh Mishra, head of research, Ashika Stock Broking