Banks Q1 Result Review: Earnings Up with Better Net Interest Income, Decline in NPAs, and Higher Interest Margins
Banks Q1 Result Review: Earnings Up with Better Net Interest Income, Decline in NPAs, and Higher Interest Margins
Last updated:
The Indian banking sector displayed robust performance in Q1FY24, benefiting from credit expansion, favourable profit margins, adequate capital and continual enhancement in the quality of assets shown by a decrease in Non-Performing Assets (NPAs).
Amidst the US banking crisis, Indian banks outperformed as reflected in sustained growth in bank credit and liquidity buffers. The Reserve Bank of India said that the upsurge in credit can be attributed to a variety of factors, with notable growth seen in the retail segment loan book. Moreover, the corporate sector also showed a substantial rebound in its lending activities as the recovery continues.
The Nifty Bank index which comprises the top banks in India witnessed a growth of 9.6% in Q1FY24 as opposed to -10.4% in Q1FY23, as the banking sector performed well.
Nifty Bank: Share Price Performance
August 2023
July 2023
June 2023
-3.80%
2.02%
1.40%
The median YoY growth of quarterly net profits and quarterly revenues of the banking sector stood at 53.8% and 30.91% respectively. The largest private lender, HDFC bank, reported a quarterly net profit of ₹12,403 crores while the largest public lender, State Bank of India (SBI), reported a quarterly net profit of ₹19,094 crores, making it the most profitable company in India ahead of Reliance Industries. The increase in profits was aided by high growth in Net Interest Incomes (NII) and a strong retail loan portfolio. There was a reduction in NPAs across the banking sector which resulted in an improvement in asset quality.
RBI Repo Rate
RBI’s Monetary Policy Committee (MPC) kept its benchmark interest rate at 6.5% for the third time in a row in August 2023, matching market expectations. This decision aims to keep inflation within its target range of 4% ± 2 % and support the economy's growth.
The head of the Reserve Bank of India, Shaktikanta Das, provided the following updates:
Due to increased vegetable prices, the inflation prediction rate has been slightly adjusted to 5.4%.
The MPC has already increased the interest rate by a total of 2.5% to help control the economy. This move is beginning to show positive results.
The GDP growth estimate for the fiscal year 2024 remains at 6.5%.
To improve transparency, the RBI will offer more clarity on interest rate changes for loans with variable EMIs. Borrowers will also have the choice to shift to fixed-rate loans or close their loans early.
The cash reserve ratio (CRR) continues to stand at 4.5%.
Surplus liquidity has risen due to the removal of ₹2,000 notes and dividends to the government.
The unchanged repo rate at 6.5% could be good news for aspiring homebuyers. It would help maintain the momentum in housing sales - particularly in the mid and luxury segments.
Private Sector Banks: Financial Performance
Private Sector Banks
Net Profit
Net Interest Margin
Net Interest Income
Gross NPA Ratio
HDFC Bank
₹12,370 crore
4.3%
₹23,599 crore
1.17%, declined by 11 bps YoY
ICICI Bank
₹11,014.45 crore
4.78%
₹18,227 crore
2.76%, declined by 65 bps YoY
Kotak Mahindra Bank
₹4,150.19 crores
5.57%
₹12,868.93 crores
1.77%, declined by 47 bps YoY
Axis Bank
₹6,113.09 crores
4.10%
₹11,959 crores
1.96%, declined by 80 bps YoY
IndusInd Bank
₹2,123.62 crores
4.29%
₹4,867 crores
1.94%, declined by 41 bps YoY
Public Sector Banks: Financial Performance
State Bank of India showed a three-digit jump in net profits.
