Banks see muted Sept qtr profits on sedate loan growth

MUMBAI Fri Oct 16, 2009 12:39pm IST

Kashmiri people perform transactions at a bank in Srinagar in this August 2008 file photo. REUTERS/Fayaz Kabli

Kashmiri people perform transactions at a bank in Srinagar in this August 2008 file photo.

Credit: Reuters/Fayaz Kabli

Related Topics

MUMBAI (Reuters) - India's mid cap lenders are likely to post a muted net profit growth in the July-September quarter owing to a sluggish increase in loans and lower treasury gains from government bonds, analysts said.

Indian Overseas Bank could see profits slip marginally, while Allahabad Bank could be an exception as it is likely to offset a moderate net interest income through gains in fees and commissions.

Despite a lower net interest income growth, lenders could hold on to, or improve, net interest margins sequentially as most high-cost deposits have been re-priced at lower rates in the quarter, said Ananda Bhowmick, analyst, Fitch Ratings.

"By and large the results are expected to be modest as treasury profits were not much to support growth," Bhowmick said.

Higher bond yields in July-September quarter of over 50 basis points impacted treasury gains, offsetting dependence of banks on non-core income in a period of sluggish loan growth.

Economic downturn has crimped Indian banks' loan growth that slowed from around 27 percent in December 2008 to 12.6 percent in September 2009, even as deposit growth remained around 20 percent, central bank data showed.

State-run banks completed a large part of their loan restructuring and significant negative surprises on slippages are not expected, Alpesh Mehta, analyst at Motilal Oswal, in his research report.

The asset quality trends are likely to remain stable, according to a Kotak Institutional Equities research report.

"We expect retail non-performing loans to start showing better trends," it said.

Although sanctions from state-owned banks were up 50 percent from October 2008 to March 2009, offtake was low because of lack of investments by industries, according to M.V. Nair, chief of Indian Banks Association and Union Bank of India.

Indian firms had postponed capital investments following the economic downturn, but stimulus spending, festivals and signs of strengthening demand are expected to boost loan demand in the December quarter.

"With industrial output picking up, we expect credit growth to rise in the near future," Nair said.

India's industrial output rose 10.4 percent in August from a year earlier, its fastest pace in 22 months.

Andhra Bank is set for a 26.49 percent rise in profit to 2.04 billion rupees, while Indian Bank may post a 20 percent profit rise to 3.33 billion rupees, a Reuters poll of brokerages showed.

Union Bank's profit may jump 14.19 percent to 4.12 billion rupees, while Yes Bank is set for a 46.70 percent rise in profits to 933 million rupees.

Yes Bank will announce results on Oct. 21, Allahabad Bank on Oct. 22 and Indian Bank on Oct. 23.

IDBI Bank and Oriental Bank of Commerce will announce results on Oct. 26.

(Reporting by Tamajit Pain; Editing by Prem Udayabhanu)

(For more news on Reuters Money visit

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared
BSE Sensex rises over 1 percent on reforms, election boost

BSE Sensex rises over 1 percent on reforms, election boost

The BSE Sensex and Nifty rose more than 1 percent on Monday to mark their biggest daily gain in more than one week after the government's energy reforms led to a rally in oil firms, while wins by Prime Minister Narendra Modi's party in two state elections raised expectations for additional reforms.  Full Article 


Indian State Media

Indian State Media

Controlling the message: Modi chooses state media  Full Article 

ONGC Stake

ONGC Stake

Govt meeting bankers to discuss share sale in ONGC - source  Full Article 

Gold Curbs

Gold Curbs

Finance Ministry wants to reimpose curbs on gold imports - ET  Full Article 

World Stocks

World Stocks

Shares advance on strong data, earnings  Full Article 

IBM Chip Unit

IBM Chip Unit

IBM to pay Globalfoundries to take chip unit  Full Article 

Eyeing Reebok

Eyeing Reebok

Investor group aims to buy Reebok unit - WSJ  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage