Mumbai: Led by state-run banks which are set to report increased strains on asset quality, the banking sector is set to see net profits decline by 11% in first quarter of the current fiscal year as compared to the last quarter of 2011-12, says a StanChart Securities report.
However, the banks could post a 43% rise in profits year-on-year, it said. As far as state-run banks are concerned, they will see increased strains on their asset quality with more loan recasts pulling down their first quarter profit by 14% quarter-on-quarter basis.
They could, however, see a 53% rise in post-tax profit on an annualized basis, the report said. With a comparatively better showing by the private sector banks, the report says overall earnings for banks will see a likely decline of 11% quarter-on-quarter but an annualized growth of 43%.
The report further says though private sector banks remain better placed in terms of overall asset quality, they too will see stress on their assets with the overall profit likely to decline by 5% q-o-q, though a growth of 30% year-on-year. “We expect net profit for state banks to grow 53% year-on-year (primarily due to the low base effect for SBI) and decline 14% quarter-on-quarter in the first quarter of the fiscal.”
“We expect net profit for private banks to grow 30% y-o-y and decline 5% q-o-q. Overall earnings for banks will likely grow 43% y-o-y and decline 11% q-o-q,” the report titled ‘India Financial-Q1FY13-Stress loans in focus again’ prepared by Mahrukh Adajania and Rounak Agarwal of StanChart Securities said on Tuesday.
The report attributes poor number to flat loan growth, sharp growth in overseas loans due to rupee fall, high trading gains and/or write-back of investment depreciation due to volatility in G-secs and corporate bond yields, pressure on core fee income due to weak corporate activity, among other factors.