private sector banks: High provisioning, margin strain reflect in private banks’ Q3 show

The private sector banks reported deceleration in aggregate operating and net profit for the third quarter in a row amid slowing growth in net interest income, rising bad loan provisioning, and continued margin pressure. Their public sector counterparts on the other hand continued to report double digit profit growth for the December quarter.

Net profit for a sample of 17 private banks grew by 5.1% year-on-year to Rs46,046 crore, the slowest pace in at least 12 quarters. The pre-provision operating profit (PPOP) rose at a 10-quarter low rate of 11.5% to Rs73,955.9 crore. The 12 PSU banks reported 13.3% and 46.8% increase in PPOP and net profit at Rs70,218 crore and Rs44,474 crore respectively. Their net profit growth was at a six-quarter high, led by Punjab National Bank, which reported a two-fold increase and State Bank of India where net profit grew by 84%. Majority of the PSU banks recorded double digit year-on-year net profit growth.

For the total sample of 29 banks, net profit grew by 22.2% to Rs90,520 crore while PPOP rose by 12.4% to Rs1.4 lakh crore. The banking sector continued to show pressure on net interest margin (NIM) during the quarter as the spread between interest earned on loans and that paid on deposits remained tight. Two out of every three banks — 19 to be precise — in the total sample reported a year-on-on-year drop in NIMs as banks scrambled to attract deposits. In the previous quarter, 12 banks had reported an expansion in NIMs. In the December 2024 quarter, only four private sector banks and six PSU banks in the sample reported an expansion in their respective NIMs year-on-year.

The total sample’s net interest income (NII) rose by 7.3% to Rs2 lakh crore, the rate of change remained in single digit for the third consecutive month. NII growth for private sector banks at 9.3% was better than 5.4% for PSU banks.