Fourth Quarter Results: Private Sector Banks Post 9.7% Drop in Net Profit

Private sector banks reported a strong profile with healthy growth in net interest income (NII), credit extraction and provision burden reduction for the fourth quarter ending March 2023 (Q4 of FY23) .

However, as a package, its net profit declined 9.7% YoY to Rs 25,317 crore in the fourth quarter. This is because Axis Bank posted losses due to its high one-time charge for the acquisition of Citibank India’s consumer business.

For the full FY23, net profit rose 23.3% yoy to Rs 1.17 trillion from Rs 94,046 crore in FY22, according to data compiled by the BS Research Bureau for the 14 private banks. that are on the list.

Axis Bank made a prudent accounting decision (provision) related to one-time non-recurring items of Rs 12,490 crore. These were charged to the profit and loss account in the fourth quarter and reported as exceptional items. Consequently, the private lender reported a net loss of Rs 5,728 crore in the fourth quarter.

Reflecting the rising benefits in borrowing rates, the NII rose 29.3 percent on-year to Rs 78,246 crore in the fourth quarter. For FY23, it rose 24.8 percent to Rs 2.84 trillion from Rs 2.28 trillion.

ICRA’s Anil Gupta said the healthy growth at NII was driven by an increase in high lending and credit rates in FY23. However, gradually, there would be a small increase in the loan rates. But appreciation of deposits to higher levels would put pressure on the NII in FY24.

Commercial banks have adjusted their benchmark-based external lending rates (EBLR) to reflect benchmark rate increases of 250 basis points (bp) between May 2022 and March 2023.

According to data from the Reserve Bank of India (RBI), the one-year average marginal cost of funds-based lending rate (MCLR) increased by 140bp between May 2022 and March 2023.

On the deposit side, the Weighted Average Domestic Time Deposit Rate (WADTDR) on outstanding deposits rose 99 bp over the same period.

Other income covering fees, commissions and cash flow income grew 18.5% year-on-year to Rs 28,825 crore in the fourth quarter.

For FY23, it showed growth of 8.5 per cent to Rs 1.02 trillion against Rs 94,427 crore in FY22.

Provisions and contingencies decreased 3.4% yoy to Rs 8,149 crore in the fourth quarter. For FY23, the decline was much larger, at 31.3%, to Rs 35,722 crore from Rs 52,030 crore in FY22. This reflected less pressure on asset quality amid a challenging environment. commercial and economic benign.

Gross non-performing assets (gross NPA), in absolute amounts, decreased by 32.3% to Rs 1.12 trillion at the end of March 2023 from Rs 1.65 trillion at the end of March 2022.

Net NPAs (bad loans), which have yet to be issued, also fell by 34% to Rs 24,418 crore in March 2023. The figure was Rs 36,970 crore in March 2022.