Public sector banks are likely to lag behind their private peers in net profit for July-September period as restructured loan and non-performing assets are likely to swell further, according to analysts. Barclays estimates that net profit of PSU banks in the second quarter of FY13 is expected to rise 16% year-on-year, while private banks will post a growth of 23% in their bottomlines.
PSU banks are likely to see muted growth in both core and non-interest income as well, analysts said. Net interest income of PSU banks are expected to grow 10%, but private banks could show a rise of 23%.
HDFC Bank is likely to lead private sector banks in net profit, posting around 30% growth. Among PSU banks, Bank of Baroda could show a decline in net profit, according to Barclays. ?(For PSUs) Both NII and non-interest income should be muted in our view. NII growth will likely be muted as banks reduced loan rates and were unable to deploy their surplus liquidity in a slow growth environment. Consequently, despite strong cost controls, pre-provisioning operating profit growth is likely to lag loan growth,? analysts at Barclays said.
In terms of efficiency, PSU banks will underperform, analysts said. The growth in operating income for PSU banks is seen around 9%, almost half the growth of private banks.
Loan growth for PSU banks are expected at 19% in the second quarter and private banks are expected to grow at 20%. Credit offtake was muted in April-September period of FY13 despite banks aggressively cutting loan rates to spur demand. Bankers said demand for corporate loans had almost dried up. Credit growth crawled at a pace of a little over 1% during the said period, data from Reserve Bank of India showed. Deutsche Bank in its preview of the quarterly results of banks said it expect slippages and restructuring to remain elevated in the second quarter of FY13 for PSU banks, while for most private banks it does not expect much stress and sees strong asset quality to continue.
Analysts at Centrum said, ?Relatively higher provisioning cost for PSBs led by slippages and incremental restructuring should lead to continuation of the divergent earnings performance trend among private banks and PSBs.?
Net NPAs and slippages are expected to be at elevated levels for public sector banks. Barclays expects SBI to report a rise of 39% in net NPA to R2,24,405 crore, and gross slippages is expected to rise over 15%. Bank Of Baroda?s gross slippages is expected to rise to 1.6% from 1%, and its net NPAs are expected to rise 75% to R19,626 crore. Meanwhile, among private banks ICICI Bank is likely to report a fall in net NPA again and Barclays estimates the fall to be 4%. Gross slippages for ICICI Bank could remaining stable at 1.4%. HDFC Bank and Axis Bank are expected to report 23% and 49% respectively, rise in net NPA.
