Q2FY25 results review: From PNB, BoB to Canara Bank – PSB profit rises 35.4% to ₹45,550 crore

Indian public sector banks (PSBs) delivered a strong performance in the September quarter (Q2FY25), outperforming their private sector peers. This was driven by a decline in provisions and a significant improvement in asset quality. Additionally, growth in non-interest income and treasury profits helped state-run lenders report strong performance in the second quarter.

Combined net profit of 12 Indian PSBs rises 35.39 percent 45,550 crore in Q2 FY25, according to data compiled by LiveMint. The country’s largest lender, State Bank of India (SBI), contributed about 40.24 per cent to PSB net profit in Q2FY25.

In the same quarter last year, PSBs had reported a combined net profit of 33,643 crores. Sequentially, net profit also increased with PSBs recording Rs 39,974 crore in the first quarter of the current financial year.

PNB leads in profit growth among public sector banks

In terms of net profit growth, Punjab National Bank led the way with an impressive year-on-year (YoY) growth of 145 per cent. Rs 1,756 crore in September 2023 4,306 crore in September 2024. Asset quality also improved, with PNB’s gross NPA falling to 4.48 per cent from 6.96 per cent a year ago, while net NPA fell to 0.46 per cent from 1.47 per cent.

Bank of India ranks second with strong growth of 63 per cent year-on-year as profits rise Rs 1,458 crore 2,373 crores. Central Bank of India reports 51 percent growth as profits rise Rs 605 crore to 913 crores on annual basis. Its gross and net NPA have come down to 4.59 percent and 0.69 percent respectively.

UCO Bank records 50 percent YoY increase in net profit 603 crore, with a reduction in gross NPAs of 3.18 per cent and net NPAs of 0.73 per cent. Bank of Maharashtra also recorded an impressive growth of 44 percent on an annual basis. Rs 920 crore 1,327 crores.

Additionally, Union Bank of India reported 34 percent rise in net profit Rs 3,511 crore 4,720 crore annually. Indian Bank’s profits also saw an increase of 36 percent. 2,707 crore, while gross NPA was reduced to 3.48 per cent and net NPA to 0.27 per cent.

Bank of Baroda’s profits recorded an increase of 23 percent year-on-year. 5,238 crores. Its gross NPA increased to 2.5 percent and net NPA to 0.6 percent.

The deposit war continues

In recent years, banks have shifted the focus of investors towards investments in capital markets rather than savings in traditional fixed deposits. This triggered a “deposit war” within the banking system, which continues, causing lenders to cut both deposit and loan growth targets.

Additionally, many small finance banks (SFBs) have increased their fixed deposit rates by more than 8 per cent for a tenure of two years. These higher rates have put SFBs in direct competition with larger banks, as their deposit rates are now 100-120 basis points higher than a year ago, reflecting the increasing challenges banks face in attracting deposits. exposes.

Amid this backdrop, Bank of Baroda has reduced its advances growth target for the second quarter to 11-13 per cent from the previous target of 12-14 per cent, and deposit growth target to 9-11 per cent. Prior guidance of 10-12 percent.

In its recent report, domestic brokerage firm B&K Securities highlighted that deposit growth in the country is expected to decline to 11.2 per cent in FY2025. According to the report, deposit growth at the end of FY 2024 was recorded at 13.8 percent. Hundred percent.

Private sector banks recorded moderate growth in profits

Private sector banks displayed more moderate profit growth in Q2FY25. Among private companies, Axis Bank recorded the highest profit growth at 18 per cent, followed by ICICI Bank at 14.5 per cent.

HDFC Bank and Kotak Mahindra Bank showed marginal profit growth of 5.3 per cent and 4.8 per cent respectively, while IndusInd Bank saw a significant decline of 39.6 per cent in profit.

Overall, private sector lenders reported an 8.21 per cent rise in net profit during the second quarter. On the asset quality front, HDFC Bank, Kotak Mahindra Bank, IndusInd Bank, RBL Bank and IDFC First Bank saw a 2 to 19 basis point increase in gross bad loans as a percentage of total assets during the quarter.

Most of these private banks, anticipating increased pressure, especially in the unsecured loan sectors, have increased provisions by setting aside additional funds to cover possible defaults.

Lenders with a higher share of unsecured loans are facing more stress than those focusing on secured lending. Sectors such as personal loans and credit cards in particular are facing default risk.

The RBI is highlighting the significant increase in unsecured lending along with potential challenges related to asset quality in the last year. In November 2023, the central bank increased the risk weight on specific segments of unsecured loans like personal loans and credit cards by 25 percentage points to 125 per cent.

Additionally, it increased the risk weight on bank loans to NBFCs. Following the COVID-19 pandemic, banks significantly increased their lending to NBFCs, which was mainly due to growth in retail and unsecured loans.

On the other hand, private banks maintained strong domestic current account savings account (CASA) ratios during the September quarter. Kotak Mahindra Bank leads with CASA ratio of 43.6 percent, followed by ICICI Bank with 40.6 percent.

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