However, the net interest margins of the lenders remained under pressure due to rising cost of funds.
Most Public Sector Banks (PSBs) reported healthy net profit in the fourth quarter, helped by strong loan growth and other income.
The cumulative net profit of PSBs was up 24% year-on-year (y-o-y) to Rs 42,847 crore during Q4.
Excluding UCO Bank and Punjab & Sind Bank, which saw a dip in net profit on a y-o-y basis in Q4FY24, the other ten PSBs registered net profit growth of 2%-160% in Q4FY24.
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However, the net interest margins of the lenders remained under pressure due to rising cost of funds.
The country’s largest lender, SBI’s net profit rose 24% y-o-y to Rs 20,698 crore during Q4, BoB’s bottomline was up 2% to Rs 4,886 crore, while PNB’s profit after tax rose the highest, at 160% to Rs 3,010 crore.
Except Punjab & Sind Bank, which registered 6% growth in advances during Q4, all other PSBs posted double digit advances growth of 11-16% during the quarter ended March.
SBI, which has nearly Rs 4 trillion of corporate loans in the pipeline, is expecting advances to grow between 14-16% in FY25. Its overall advances grew 15% to Rs 37.67 trillion as on March-end.
Large PSBs including State Bank of India (SBI), Bank of Baroda (BoB) and Punjab National Bank (PNB), among others, are targeting to maintain net interest margin (NIM) in the range of 2.90%-3.30% in Q1FY25.
SBI, last week, said it is aiming to maintain the NIM — a key indicator of lenders’ profitability — at 3.30% in FY25. “There is always a time lag for re-adjustments when it comes to loan book and deposits,” SBI chairman Dinesh Khara said.
“I think we have already plateaued as far as our deposit cost is concerned…we hope that we will be having repricing of loans…we are hopeful that we will be able to maintain NIMs at current level,” he said.
SBI’s NIM moderated by 30 basis points (bps) y-o-y to 3.30% in Q4FY24. Its net interest income (NII) — difference between interest earned and expended — rose just 3% to Rs 41,655 crore during the same period.
BoB, which also saw its NII rise by just 2% in Q4 to Rs 11,793 crore, feels that the cost of deposit has now stabilised and with better liquidity and moderating interest rate scenarios, the lender is getting “much more” sensitive liability which can be re-priced at lower rate, thereby aiding NII.
“We will be operating in the band of 3.15% (NIM), plus or minus five basis points (bps) and if you look at Q4FY24, global NIM grew 17 bps sequentially to 3.27%, as we rebalanced the asset and liability metrics,” Bank of Baroda MD, CEO Debadatta Chand told FE in an interaction.
“Cost of deposit is almost stable now. All my deposits of one-year tenure are re-priced, so considering a stable interest rate regime, I don’t think the cost of deposits will rise going forward,” he added.
BoB, which also saw its NII rise by just 2% in Q4 to Rs 11,793 crore, feels that the cost of deposit has now stabilised and with better liquidity and moderating interest rate scenarios, the lender is getting “much more” sensitive liability which can be re-priced at lower rate, thereby aiding NII.
BoB is aiming to grow overall advances by 12-14% in FY25. Within this, retail will continue to grow at a higher pace of over 20%, corporate growth would be around 10-11%, and MSME and agriculture will almost be at 15%. In FY24, its overall advances grew 12.5%, of which domestic advances rose 12.9% and global ones grew by 10.6%.
Further, as core income remains under pressure due to higher competition on deposits, lenders are also focusing on growing their other income more during FY25. In order to boost non-core income growth, Canara Bank has made all its executive directors a part of the bank’s investment committee to enable “more discussions and effective decisions”, K Satyanarayana Raju said.
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While interest rates are slowly softening, ultimately benefiting treasury income, the lender is not just focusing on treasury income to boost other income. “We centralised the non-fund based income segments. When non-fund based business grows, you get processing charges, commissions, and we are underwriting large credit proposals, down-selling them too,” he said, adding that the approach is now multi-fold, with the bank having started a new cash management vertical. It is expecting `250-300 crore of fee income alone from the new vertical.
Overall deposits of PSBs rose by 10% YoY on average in Q4, and will likely continue growing between 10%-12% in FY25, bankers say. “We will open 130 new branches in FY25 and are focusing on generating good quality CASA (current account, savings account) by introducing tab banking, which results in higher balances,” said UCO Bank MD, CEO Ashwani Kumar, adding that the lender is targeting up to 10% deposit growth in FY25. The bank did not raise deposit rates in Q4 and is unwilling to raise bulk deposits, and is using excess statutory liquidity ratio (SLR) securities to fund credit growth, he said.
