Strong profit gains for Indian PSBs
Indian public sector banks (PSBs) posted strong financial results in the September quarter (Q2FY25), surpassing private banks. Improved asset quality, reduced provisions, and higher non-interest income contributed to their impressive performance.
According to a report, the combined net profit of 12 PSBs rose by 35.4% to ₹45,550 crore in Q2 FY25. State Bank of India (SBI) alone contributed 40.24% of this total profit.
Leading banks by profit growth
Punjab National Bank (PNB) saw the highest growth among PSBs, with a 145% increase in net profit, jumping from ₹1,756 crore in September 2023 to ₹4,306 crore in September 2024. PNB’s asset quality also improved, with gross non-performing assets (NPAs) falling to 4.48% from 6.96%, and net NPAs reducing to 0.46% from 1.47%.
Bank of India reported a 63% profit increase, rising from ₹1,458 crore to ₹2,373 crore year-on-year. Central Bank of India’s profit climbed by 51% to ₹913 crore, and its NPAs fell to 4.59% (gross) and 0.69% (net).
UCO Bank and Bank of Maharashtra also recorded profit growth of 50% and 44%, respectively, with improvements in asset quality.
Challenges in deposit growth
Despite strong profit figures, PSBs face challenges in deposit growth amid a “deposit war.” Investors are increasingly turning to capital markets instead of traditional savings. Small finance banks (SFBs) have raised deposit rates to over 8% for two-year terms, pressuring larger banks.
In response, some banks, including Bank of Baroda, have adjusted their growth targets. Bank of Baroda revised its advances growth target to 11-13% from 12-14% and its deposit growth target to 9-11%.
Moderate growth for private-sector banks
Private sector banks recorded more modest profit increases. Axis Bank led with an 18% rise, followed by ICICI Bank at 14.5%. HDFC Bank and Kotak Mahindra Bank showed growth of 5.3% and 4.8%, respectively, while IndusInd Bank saw a profit decline of 39.6%.
Private banks also raised provisions to cover potential defaults, particularly in unsecured lending. The Reserve Bank of India has highlighted growing concerns in this segment and raised risk weights on unsecured loans by 25 percentage points to 125% in November 2023.
