Big banks Q3 net up on higher other income, dip in provisions

Half a dozen banks reported higher quarterly net profit Saturday, as growth in retail loans, increased non-interest income and a fall in provisions more than offset the impact of increasing cost of funds that weighed on their net interest margins (NIMs).

ICICI Bank, the largest of the six lenders, reported a 24% rise in net profit to ₹10,272 crore for the quarter ended December 31, compared with ₹8,312 crore a year earlier.

A key driver of its profit growth was other – or non-interest – income which, excluding treasury, rose 20% to ₹5,975 crore, led by 19% growth in fee income. Net interest income (NII) – or the difference between interest income earned on loans and that paid for deposits – rose at a slower 13% to ₹18,678 crore, largely reflecting the weaker NIM which eased to 4.43% from 4.65% a year earlier.

HDFC Bank, the nation’s largest lender by market value, also on Tuesday reported a smaller net interest margin, even as its net profit rose 34% year-on-year.

ICICI Bank executive director Sandeep Batra shrugged off the reduction in margin as an industry phenomenon due to rising deposit rates. “We expect to end NIMs broadly at the same level this fiscal where we were in the last fiscal,” Batra said.

Gross additions to non-performing assets rose to ₹5,714 crore from ₹4,687 crore in September 2023, mainly because of an increase in slippages from kisan credit and rural loans which, Batra said, was cyclical in nature.

Provisions against doubtful assets, however, fell to ₹1,050 crore from ₹2,257 crore a year earlier. While the bank set aside ₹627 crore in the last quarter against alternate investment funds (AIFs) as directed by the Reserve Bank of India, it also benefited from write back of provisions.The AIF provisions weighed on the performance of another large bank. Kotak Mahindra Bank‘s profit grew by a tepid 8% year-on-year to ₹3,005 crore, due to provisioning towards AIFs and a loss in its fixed income book.

The bank made a provision of ₹190 crore on its AIF investments. Its funded outstanding to such companies was ₹65 crore as of December 31, 2023.

It also had to make provisions on its trading book of ₹168 crore.

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