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FY17 profit of 21 PSBs accounts for one-tenth of 16 private peers

The clutch of public-sector banks (PSBs) recorded a net profit of Rs 473.71 crore for the year, against the Rs 40,122.67 crore in profit posted by the private players. (Representational Image: Reuters)

The net profit of 21 state-owned banks was less than that of small private lender Karur Vysya Bank and accounted for one-tenth of that clocked by 16 private-sector banks in FY17, according to data from Capitaline. The clutch of public-sector banks (PSBs) recorded a net profit of Rs 473.71 crore for the year, against the Rs 40,122.67 crore in profit posted by the private players. This, however, marks an improvement over FY16, when the same set of PSBs had posted a net loss of Rs 19,634.09 crore, compared with a net profit of Rs 40,294.38 crore recorded by their private sector peers.

The bank that performed the worst in terms of profitability among PSBs was Bank of Maharashtra, which turned a net loss of Rs 1,372.51 crore, as compared to a net profit of Rs 100.69 crore in FY16.

Others banks which saw profits turning to losses this year were Oriental Bank of Commerce and Bank of Maharashtra. Losses widened at IDBI Bank, Central Bank of India and Indian Overseas Bank and narrowed at UCO Bank, Dena Bank, Bank of India and Allahabad Bank.

Banks that managed to reverse their losses and turn profitable were Corporation Bank, Bank of Baroda, Canara Bank, Bank of Baroda (BoB), United Bank of India, Syndicate Bank and Punjab National Bank (PNB).

Not all of these gains can, however, be attributed to the lendersRs operational health. While some of it came from fee income, large lenders such as PNB, BoB and Canara pushed up profits by writing back pension provisions.

In a note dated May 8, Morgan Stanley wrote about Canara Bank, “We expect PPoP (pre-provision operating profit) to remain under pressure in FY2018 given lower margins after lower lending rates and bond spreads, muted loan growth and higher opex.”

Analysts seem more optimistic about BoBRs s operational turnaround. Nomura wrote in a note dated May 19, “BOBRs s Q4FY17 reported PPOP was largely in line but underlying growth momentum indicates that core PPOP performance should finally turn around in FY18.”

The best performers on the profitability front were Vijaya Bank and Indian Bank, both of whom saw their net profits almost double to Rs 750.48 crore and Rs 711.38 crore, respectively.

State Bank of India (SBI) saw its full-year net profit rise 5.36% year-on-year to Rs 10,484.1 crore in FY17. However, it is widely expected that SBI will not be able to sustain its performance as the bad loans of its associate banks, merged with it on April 1, begin to exert pressure on the bottom line. The management has not been too forthcoming in terms of guiding for slippages.

On Friday, SBI chairman Arundhati Bhattacharya said, “It will be very difficult to give you a perfect number (on slippages) at this stage. One of the reasons again is that we would like to take this quarter to have a proper look at the associate banksRs books as well,” adding, “Though we have done that very well, in spite of that I think we have to see one quarter for trying to give any numbers of slippages. The only thing I can tell you that directionally it is definitely slowing down.”