Private sector banks posted 47.2 percent year-on-year (YoY) growth in net profit in the April-June quarter (first quarter, or Q1) of 2022-23 (FY23) on a sharp fall in provisions and contingencies, a report by Business Standard said.
Propped up by repricing of loans and robust credit growth, net interest income (NII) expanded 16.9 percent YoY and 3.7 percent quarter-on-quarter, revealed a BS Research analysis of 14 listed Indian private banks.
"The reporting quarter was marked by volatility in bond markets as a response to central banks’ action to rein in runaway inflation. The contribution from the treasury was negligible or absent, given the hardening of yields as the RBI hiked the policy repo rate by 90 bps in the quarter. As a consequence, other income, where treasury revenues have a significant contribution, fell 4 percent YoY in Q1FY23 and 14.3 percent sequentially," noted the market daily.
It further pointed out that the provisions and contingencies declined 56 percent YoY, helping bolster the bottom line. Improved asset quality profile supported the decline in provisions. Gross non-performing assets also declined 11 percent to ₹1.65 lakh crore at the end of June, from ₹1.9 lakh crore a year ago.
Nitin Aggarwal, senior group vice-president (banking research) Motilal Oswal Securities, told BS that the trend of bank performance in Q1FY23 was on expected lines.
“While banks have been quick to increase lending rates, the transmission to deposit rates has been relatively sluggish. Deposit rates are reliant on demand for credit, as well as liquidity conditions in the banking system,” BS noted.
BS also highlighted that private banks under review posted an 18.2 percent growth in advances — higher than the rate at which the banking system’s loan book expanded (14.4 percent YoY) in June. Their deposits also grew 14 percent YoY — higher than the banking system’s 9.8 percent until the end of June — according to the RBI data, added the report.