Analysis of Q4 2011 Banking Companies' performance Public Sector Vs Private Sector Ref.

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BRIEF BACKGROUND
The banking sector in India has been in stage which has seen tremendous growth. After the policy of LPG the Indian banks, the dominant financial intermediaries in India, have made good progress over the last five years. this is shown by the various parameters such as annual credit growth, profitability, and trend in gross non-performing assets (NPAs). While the annual growth of credit growth rose to about % during the last five years, profitability (average Return on Net Worth) was maintained at around 15% during the same period, and gross NPAs fell from 3.3% as on March 31, 2006 to 2.3% as on March 31, 2011. Good internal capital generation, reasonably active capital markets, and governmental support ensured good capitalisation for most banks during the period under study, with overall capital adequacy touching 14% as on March 31, 2011. At the same time, high levels of public deposit ensured most banks had a comfortable liquidity profile. Many banks also maintained a very good NIM (net interest margin) which has helped raise profitability of banks, both in the top line as well as the bottom line Banks in India have improved thanks to various new technology, rising middle class, better liquidity position and strengthening of risk management. However certain amount of kudos has to be given to Indian banks for withering the economic downturn with rattled the world. Many international banks such Bank of America had to be bailed out and more than 32 American banks were closed down. Moreover a tightening liquidity situation, increases in wages following revision, and changes in regulations by the Reserve Bank of India (RBI), some of which prescribed higher credit provisions or higher capital allocations.

Currently, Indian banks face several challenges, such as increase in interest rates on saving deposits, possible deregulation of interest rates on saving deposits, a tighter monetary policy, a large government deficit, increased stressing some sectors (such as, State utilities, airlines, and microfinance),restructured loan accounts, unamortised pension/gratuity liabilities, increasing infrastructure loans, and implementation of Basel III. F:\banking\sr-banking-sector-review-q4-fy11.pdf

PUBLIC BANKS http://www.moneycontrol.com/stocks/marketinfo/qtrgrowth/index.php?indcode=10&call_o ption=N

The above link will take you to moneycontrol.com where the quarterly review of the public sector banks in India has been good. However there have been some problems due to the rising deposit rate and lower interest lending rate thereby decreasing the NIM. Q4 FY11 Bad For Public Sector Banks: Total income grew slower by 11.5% YoY compared with20% YoY in Q3 FY11. Net Interest Income grew by 18.6% YoY in Q4FY11 compared with 45% YoY growth in Q3 FY11. Net profit saw even further decline as higher costs -- such as pensions and provisioning -- impacted the growth in fourth quarter. Net profit growth declined by 9.5% YoY compared with 21% YoY growth a quarter ago. However from the above link it can be seen that the public sector banks have done immensely well SBI net profits rose from 20.88 crores to 4050 crores a mind blowing 19296.55% from Q4 last year increase in net profits. only Canara bank, Indian bank and oriental bank suffered losses, else everyone had almost a double digit growth. This is taking top line and bottom line into perspective.

PRIVATE BANKS http://www.moneycontrol.com/stocks/marketinfo/qtrgrowth/homebody.php?indcode=9 &call_option=N&group=A Taking the various private banks such as axis bank, federal bank, icici bank, hdfc bank etc have done very well. They have sustained growth of 15.88%, 17.70%, 10.05%, 19.20% YoY respectively. Taking a QoQ Perspective there has been an increase of 15.87%,17.70%,10.05% and 19.2% growth. This shows the potential of the Indian banking industry. Private banks performed way better than the

Public Vs Private Banks Public Vs Private Banks Private banks outperformed public sector banks in Q4: Public Sector Banks : Public sector banks fared poorly in Q4FY11 due to rise in cost of deposits and higher cost of pensions and provisioning seen in the sector. Total income grew slower by 11.5% YoY compared with 20% YoY in Q3 FY11. Net Interest Income grew by 18.6% YoY in Q4FY11 compared with 45% YoY growth in Q3 FY11. Net profit saw even further decline as higher costs such as pensions and provisioning impacted the growth in fourth quarter. Net profit growth declined by 9.5% YoY compared with 21% YoY growth a quarter ago.

Quarterly performance Public sector banks fared poorly in Q4FY11 due to rise in cost of deposits and higher provisioning seen in the sector. Total income contracted by 1.4% QoQ compared with 3.7% QoQ rise in Q3 FY11. Net Interest Income declined by 10.4% QoQ in Q4FY11 compared with 7.7% QoQ growth in Q3 FY11. Net profit declined due to a rise in interest costs. The quarter also saw major banks such as SBI cleaning up their books. Net profit growth declined by 32.5% QoQ compared with 22% QoQ growth a quarter ago.

Private sector Banks Total income grew higher by 23.3% YoY compared with 20.9% YoY in Q3 FY11. Net Interest Income maintained growth momentum by 24.2% YoY in Q4FY11 compared with 24.6% YoY growth in Q3 FY11. Net profit saw moderation though continues to be high compared with public sector banks. Net profit Growth stood at 25.1% YoY compared with 32.7% YoY in Q3. Quarterly performance Total income grew higher by 39.4% QoQ compared with 6.2% QoQ in Q3 FY11. Net Interest Income growth improved by 9% QoQ in Q4FY11 compared with 7.3% QoQ growth in Q3 FY11. Net profit saw moderation though continues to be high compared with public sector banks. Net profit grew 11.5% QoQ compared with 15% QoQ in Q3 FY11.

The private banks have performed much better than public and the change in the net profit shows how the banking industry had fared in the various quarters.

NET PROFIT (4 MAIN PRIVATE BANKS)

2000 1800 1600 1400 1200 1000 800 600 400 200 0 ICICI HDFC FEDERAL BANK AXIS BANK Q4 Q3 Q2 Q1

NET PROFIT (4 MAIN PUBLIC SECTOR BANKS)

4,500.00 4,000.00 3,500.00 3,000.00 2,500.00 2,000.00 1,500.00 1,000.00 500.00 0.00 SBI ALLAHABAD BANK BANK OF INDIA Category 4 Q4 Q3 Q2 Q1

NET PROFIT CHANGE(%) PRIVATE BANKS

35 30 25 20 15 10 5 0 ICICI HDFC FEDERAL BANK AXIS BANK Q4 Q3 Q1

PUBLIC BANKS

100 80 60 40 20 0 SBI -20 -40 ALLAHABAD BANK BANK OF INDIA IDBI Q4 Q3 Q2