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India's banking sector recorded highest profit in last 26 quarters

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India's banking sector recorded highest profit in last 26 quarters

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India's banking sector has reported their highest quarterly profits in the last 26 quarters. The sector has seen good performance in terms of stressed assets where in the asset quality has improved and restructured books have largely remained under control. While PSU Bank have continued their Q4FY21 momentum, private sector banks have performed well on account of lower slippages and strong recovery.

Profit momentum for India's banking sector continued from the financial year 2021 to 2022 as the sector reported its highest profit in the last 26 quarters or six and a half years and private banks have been the better performers.

The banking sector saw its profit after tax (PAT) grow by 86.9 percent year-on-year (YoY) on the back of the lowest stress on the balance sheet in the last four years in the banking sector.
For the sector, strong recoveries and upgrades aided their asset quality while lower slippages quarter-on-quarter (QoQ) ensured that credit cost remained on the lower side.
Private banks are back with a bang
Many private banks witnessed high operating expenses (opex) in the March quarter ended 2022, just like they did in the third quarter which impacted their operating profits. However, lower provisions, for the majority of them, meant that profit growth was robust.
Private banks have performed well on account of lower slippages and strong recovery. Robust growth in PAT (QoQ) was seen for Bandhan Bank, DCB Bank, YES Bank, Kotak bank, RBL Bank, IDFC First Bank, etc.
While Suryoday SFB was the only private lender to report a net loss in the March quarter ended 2022. Loan growth remained better than the industry average for private banks, up 16.2 percent YoY & 5.7 percent QoQ. Hence, they continued to gain the market share, which they have been doing for the last few years now.
Talking about asset quality, GNPA declined by 6.6 percent and NNPA declined by 11.7 percent QoQ. Hence, private banks now have a net NPA below 1 percent – the first time in 26 quarters.
How PSU banks performed in Q4FY22
The decline in stress has been the most for public sector undertakings (PSU), which also meant that PSU banks reported the highest PAT in 26 quarters. However, the pace of pat growth, on a QoQ basis, is the slowest in the last five quarters, at a mere 0.3 percent.
Massive turnaround, QoQ, in profits, was led by Indian Bank, Union Bank, IOB, IDBI Bank and Punjab & Sind Bank. Recovery was strong for PSU banks in the fourth quarter ended 2022 like it was in the third quarter.
Value-wise, gross non-performing assets (GNPA) are down 2.9 percent QoQ & net non-performing assets (NNPA) is down 8.1 percent QoQ. None of the PSU banks has reported a net loss, for the fourth quarter in a row.
Here are the best performing private sector and PSU banks:
 Private sector banksPSUs
Bandhan BankIndian Bank
DCB BankUnion Bank
 YES BankIndian Overseas Bank
 Kotak bankIDBI Bank
RBL BankPunjab & Sind Bank
Operating profit growth - a key metric
One of the key points in the results has been the operating profits which have been on the weaker side due to several reasons. While treasury losses have impacted some PSU Banks, for private banks, higher opex, w.r.t. branch expansion or loan book from direct selling agents (DSA) has impacted their operational performance.
Out of 35 lenders, 8 lenders saw a decline in operating profits, QoQ. These include the likes of HDFC Bank, CSB Bank, Punjab & Sind Bank, Federal Bank, IDBI Bank, Indian Bank, UCO Bank and Suryoday SFB.
Overall, operating profit for the sector was at Rs 103,614 crore, up 4.6 percent YoY and 3.8 percent QoQ.
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