In Q4FY12, private sector banks clearly outperformed its state-owned peers. On balancesheet
expansion issue, private sector banks under coverage outperformed barring ICICI
Bank. Among state-owned banks, majority of banks grew their deposit base faster than the
overall industry; Andhra Bank, Syndicate Bank and UBI recorded much faster growth
On credit book expansion front, bigger private sector banks (barring Axis Bank) grew their
books prudently at a slower pace. Among PSU banks, most of banks grew in-line or at slower
pace than the industry barring PNB and UBI. In case of Union Bank, most of credit book
accretion took place in Q4 itself
On margin front, majority of banks under coverage reported decrease in margin. BoI, ICICI
Bank and Syndicate Bank recorded improvement in margin on Q/Q basis. On YoY basis,
most of banks under coverage reported decline in margin except for Axis Bank, ICICI Bank,
SBI and Syndicate Bank
On fee income front, majority of banks recorded healthy growth on Q/Q and Y/Y basis.
Majority of banks reported good traction in fee income; Canara Bank, ICICI Bank, KVB and
Syndicate Bank recorded de-growth on YoY basis
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Majority of state-owned banks under coverage except for BoI, SBI and UBI reported increase
(on QoQ basis) in gross slippages ratio. Slippages from restructured loan book also added to
increase in slippages ratio; PSU banks with higher delinquency rates in previous quarters
were better off in the Q4
Private sector banks recorded decline in delinquency rate in Q4FY12. Further decline in
provision coverage ratio (including technical write-offs) on QoQ basis across state-owned
banks was qualitatively negative
In case of state-owned banks, core profitability took a beating due to pressure on margin
though fee income remained strong. For majority of state-owned banks, gross slippages ratio
also increased due to slippages from restructured loan book. Overall, PSU banks’ earning
quality was subdued. On other hand, private sector banks were better off on the back of
stable margin, healthy fee income and lesser slippages ratio
In Q4FY12, some of the state-owned banks under coverage expanded their credit book higher than
industry likes PNB and Union Bank. Canara Bank, SBI and OBC decided to moderate their pace in
order to maintain asset quality, margin and conserve capital
In the quarter, most of banks under coverage recorded much higher traction in investment books
with few exceptions likes BoI, IOB, SBI and UBI. Slackness in credit demand and banks’ higher
base rate (as compared to blue chip corporates’ CP rates) led corporates to go for CP issuances.
Axis Bank, HDBK, KVB and PNB reported higher growth in investment book
In the quarter, SCBs’ investment expanded at a pace of 3% Q/Q & 16% Y/Y, while our coverage
universe reported 20% growth on an average. Majority of growth was contributed by addition of NSLRinvestments
in a form CPs and CDs
In Q4FY12, SCBs’ deposits base expanded by 17.4% Y/Y and our coverage universe grew at
14.6% on an average. Majority of banks under coverage recorded slower growth than industry
barring IOB, PNB, CUB and KVB.Smaller private sectorbanks could report better traction due to
base effect. Majority of banks under coverage witnessed sequential decline in their CASA shares.
Most of banks reported single-digit growth with an exception of CUB which recorded double-digit
growth. ICICI Bank reported de-growth in CASA deposits on QoQ basis.
In Q4FY12, in order to expand their credit books, banks pushed credits into pipeline reflecting in
higher credit-deposit ratio and incremental C-D ratio. Barring Syndicate Bank, all other banks under
coverage recorded expansion in incremental C-D ratio on sequential basis. Subdued deposit
mobilization also reflected into higher incremental C-D ratio
Majority of banks under coverage recorded moderation in NII growth barring BoI and ICICI Bank;
Andhra Bank, OBC and PNB reported de-growth in NII which was mainly due to interest income
losses due to loan restructuring & high slippages and difficulty in passing on higher liabilities cost
On margin front, majority of banks under coverage reported decrease in margin. BoI, ICICI Bank
and Syndicate Bank recorded improvement in margin on Q/Q basis. On YoY basis, most of banks
under coverage reported decline in margin except for Axis Bank, ICICI Bank, SBI and Syndicate
Bank
On fee income front, majority of banks recorded healthy growth on Q/Q and Y/Y basis. Majority of
banks reported good traction in fee income; Canara Bank, ICICI Bank, KVB and Syndicate Bank
recorded de-growth on YoY basis
In end-Q4FY12, 10-year bond yield ended at marginally lower level of 8.53% level and also due to
volatility in bond yield across y y tenures through out the quarter, PSU banks could utilize the
opportunity to report some capital gains on their fixed-income books
In Q4FY12, in case of state-owned banks, employees’ expenses rose at moderate pace on YoY
basis mainly due to higher base of provisions for pension and gratuity liabilities in previous year
corresponding period. IOB and employees’ expenses grew at much faster pace. IOB began making
employees’ pension provisions for next wage revision. For private sector banks under coverage,
employees’ expenses reported much higher increase due to rapid branch expansion
Majority of state-owned banks under coverage except for BoI, SBI and UBI reported increase (on
QoQ basis) in gross slippages ratio. Slippages from restructured loan book also added to increase
in slippages ratio; PSU banks with higher delinquency rates in previous quarters were better off in
the Q4. Private sectorbanks recordeddecline in delinquency rate in Q4FY12
In case of state-owned banks, core profitability took a beating due to pressure on margin though fee
income remained strong. For majority of state-owned banks, gross slippages ratio also increased
due to slippages from restructured loan book. Overall, PSU banks’ earning quality was subdued. On
other hand, private sector banks were better off on the back of stable margin, healthy fee income
and lesser slippages ratio
Further decline in provision coverage ratio (including technical write-offs) on QoQ basis across
state-owned banks was qualitatively negative
In Q1FY13, on core performance front, banks’ sequential NII growth would be tad lower due to
subdued credit demand and asset pricing pressure. Core fee income is also expected to be muted.
On YoY basis, PSU banks could gain on asset quality and provisioning front
In Q1FY13, G-sec yields have been falling from the top of 8.6% level to 8.3% in anticipation of policy
rate cut. In particular for state-owned banks, there could immediate gains in terms of treasury gains
and MTM investment depreciation write-backs
Overall, in Q4FY12, private sector banks outshined state-owned banks qualitatively and
quantitatively. Private Banks reported healthy growth in core fee income with firm margin (barring
Axis bank). On asset quality front, private sector banks restricted their slippages ratios further.
Overall, privatebanks’ performance remained strong on CASAdeposit,incremental gross slippages
& provision coverage on balance-sheet side
State-owned banks’ performance dwindled mainly due to strain on margin and further increase in
slippages ratio. On liability-side front, bigger PSU banks could hold on their low-cost deposit
composition on QoQ basis. PSU banks’ provision coverage ratio came down due to lesser credit
costs and also reflecting banks’ efforts to push bottomline and aid their core capital
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