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N.S.Vageesh

Chennai , Jan. 29

THERE has been a noticeable slowdown in the profit growth of public sector banks for the third quarter ended December 2003.

Profits of 13 public sector banks, for whom results are available, showed a 15 per cent growth over the corresponding quarter in the previous year.

A couple of these banks had posted a near 100 per cent growth in the first half of the fiscal.In this quarter, too, there were two banks that posted such remarkable growth — Allahabad Bank and Dena Bank. Corporation Bank, Andhra Bank and Syndicate Bank, however, posted dips in profits of 25 per cent, 17 per cent and 11 per cent respectively.

This list does not include the results of State Bank of India, Punjab National Bank and Bank of Baroda, among the larger banks in the system.

The profit growth was dampened on account of two reasons. One, the growth in "other income" of banks has tapered off. It grew by a mere 5.5 per cent for the 13 banks. Other income includes gains from treasury (gains made mainly from selling government securities).

Except IOB, Syndicate Bank, Canara Bank, State Bank of Bikaner and Jaipur and Dena Bank, all the other banks saw their other income almost flat during this period.

Second, there was an increase in the banks' provisioning for bad loans, to the tune of 30 per cent in this quarter.

Banks have to recognise a loan default as a non-performing asset within 90 days this year, compared to the 180-day norm that was followed hitherto.

Banks made ad hoc provisions at the end of the last fiscal for the transition to the 90-day norm. They now seem to be crystallising their default numbers, as reflected in the increasing provision.

The full impact of the changeover will be felt when the results come out for the full fiscal in May 2004. For some banks, the increase in provisioning was quite high in this quarter.

Syndicate Bank, for instance, increased provision for NPAs from Rs 5 crore to Rs 60 crore, while Canara Bank increased provision from Rs 84 crore to Rs 137 crore; Corporation Bank increased it to Rs 64 crore from Rs 35 crore.

More Stories on : Financial Performance | Public Sector Banks | Appraisal

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