Banks’ overall profit in Q4 FY24 could be buoyed by treasury gains

FY24 has ended on a positive note for Bank treasuries, with Government Securities’ (GSecs) yields softening on a yearonyear (yoy) as well as quarteronquarter (qoq) basis.

What this means is that treasury profits could buoy Banks’ overall profitability in the fourth quarter as well as the financial year.

For example, the yield of the widely traded benchmark 10year GSec (coupon rate: 7.18 per cent) softened about 26 basis points (bps) yoy and about 12 qoq to close at 7.0556 per cent on Thursday, which was the last trading day of the current financial year. One basis point equals onehundredth of a percentage point.

The price of the aforementioned security closed at ₹100.83, about 80 paise higher visavis the Decemberend 2023 close and about ₹1.20 paise higher visavis Marchend 2023 close.

GROSS BORROWING

GSecs yields eased quite a bit in the fourth quarter after the government announced a lower gross borrowing for FY25 in the Union Budget, said V Rama Chandra Reddy, HeadTreasury, Karur Vysya Bank. Further, the possibility of a repo rate cut in the second quarter and the inclusion of GSecs in global bond indices yields.

The government’s gross borrowing in FY25 is pegged lower at ₹14.13 lakh crore against ₹15.43 lakh crore in FY24.

“Most of the Banks will make treasury gains in the reporting quarter. Banks which made provisioning in the previous quarters for marktomarket losses will see writeback in provisions,” said a debt market dealer with a private sector bank.

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