Q3 results: PSBs' net profit jumps 66% on healthy interest margins

Other income rises in Q3 against contraction in Q2

Eleven public-sector banks (PSBs) reported an average of 65.7 per cent year-on-year (YoY) growth in net profit at Rs 28,620 crore in the third quarter ended December 2022 (Q3FY23). Growth came primarily on the back of a steady rise in net interest income (NII).

Sequentially, the state-owned lenders posted a 13.6 per cent rise in net profit over the Rs 25,183 crore in July-September 2022 (Q2FY23).

Almost 50 per cent of PSB net profit in Q3FY23 came from State Bank of India (SBI), the largest lender in India, the data compiled by the BS Research Bureau for the 11 banks showed. SBI posted the highest quarterly profit of Rs 14,205 crore. Except Chennai-based Indian Overseas Bank (IOB), all PSBs have announced their results. IOB will do so on February 9.

The state-owned banks posted a growth rate of 24.6 per cent YoY in NII to Rs 94,409 crore in Q3FY23. Sequentially, it rose 9.4 per cent from Rs 86, 314 crore in the second quarter.

The rise in loan volumes, the benefit of repricing loans, and increase in lending rates amid a hardening interest rate cycle also contributed to healthy NII, bankers said.

The net interest margin (NIM), an indicator of profitability, has risen to 3.55 per cent (FY17-22 average: 3.1 per cent). This is set to change and as banks increase deposit rates, said Fitch Ratings.

The banking system’s loans expanded by 14.9 per cent YoY as of December 2022, up from 9.2 per cent YoY growth a year ago. Loans rose 17.2 per cent YoY and deposits 10 per cent YoY. Other income, comprising revenue from commissions, fees, treasury, and recoveries from written-off accounts contributed to the bottom line in Q3 with 23.2 per cent YoY growth to Rs 31,284 crore.

It had shrunk 9.4 per cent YoY in the previous quarter. The pressure from rising bond yields was less in the reporting quarter (Q3FY23) than in the previous one. Sequentially, other income expanded by 14.9 per cent from Rs 27,227 crore in Q2FY23.

Provisions and contingencies for the portfolio of loans and investments expanded 11.2 per cent YoY to Rs 25,132 crore and sequentially 7 per cent from Rs 23,491 crore.

The elevated pace of loan growth entails higher standard asset provisions. Also, banks have to set aside money for ageing non-performing assets (NPAs).

Bankers said besides lower slippages from the loan book, the performance of the restructured portfolio had been satisfactory. The provision coverage ratio for the existing stressed loans has been more than 80 per cent, built over many years. The asset-quality profile, which has been improving for several quarters, maintained the trend in Q3FY23 as well.

Gross NPAs declined by 18.3 per cent YoY to Rs 4.4 trillion at the end of December 2022. Sequentially, they declined 6 per cent from Rs 4.72 trillion at the end of September 2022.

Net NPAs declined by 32.3 per cent to Rs 1.11 trillion at the end of December 2022 and sequentially by 10.6 per cent from Rs 1.24 trillion at the end of September 2022.