State-run banks post 81% rise in Q4 net profit

Raise capital adequacy, provisions for bad loans

Public sector lenders have posted an 81 per cent year-on-year (YOY) increase in net profit in the fourth quarter ended March 2022 (Q4FY22) on improvement in net interest income (NII) and reduction in provisions for bad loans.

For FY22, net profit rose by 91.3 per cent.

Nine of the 12 public sector banks have announced results so far.

NII, which is earnings from loans minus what is paid on deposits, rose 18.5 per cent YOY to ~70,825 crore in Q4FY22.

While low interest rates on loans shrank interest income, banks benefited from a fall in the cost of funds amid abundant liquidity in the system as the Reserve Bank of India pumped in resources to support economic revival and growth.

The net interest margin (NIM) moved up for all lenders.

State Bank of India’s NIM was 3.36 per cent in Q4FY22, up from 3.26 per cent in Q4FY21.

Central Bank of India, which is looking for an exit from prompt corrective action (PCA), saw a sharp uptick in the NIM from 2.04 per cent in March 2021 to 3.26 per cent in March 2022.

Unlike improvement in NII and margins, other income comprising revenues from treasury trading in securities, commissions, and fees declined by 27.7 per cent to ~27,873 crore in Q4FY22.

The gradual increase in yields dented gains in the bond portfolio.

Karthik Srinivasan, group head, financial sector ratings, ICRA, said the results of public sector banks were in line with the rating agency’s expectations.

There are no negative surprises so far. The improvement in asset quality is expected to continue into FY23. However, one needs to monitor the restructured loan books. These accounts will come out of the moratorium this financial year.

The asset quality of all lenders improved with reduction in bad loans and increase in provisions for the existing bad loans portfolio.

SBI’S gross non-performing assets (GNPAS) declined from 5 per cent in March 2021 to 4 per cent in March 2022.