PRIVATE BANKS REPORT HIGHER INTEREST INCOME, STABLE MARGINS

The private sector banks that have declared their second quarter results so far reported stable margins, thanks to lower cost of funds and higher interest income, compared with the corresponding quarter last year.

Of the six private sector banks that have declared results so far, Axis Bank, ING Vysya Bank and IndusInd Bank reported higher Net Interest Margins, while HDFC Bank and YES Bank reported flat NIMs. Kotak Mahindra Bank ended the quarter with slightly lower margins.

Most banks had hiked their benchmark prime lending rates and deposit rates in the middle of the second quarter, following the hike in key interest rates by the Reserve Bank of India in the mid-term review. As a result, they were able to offset the impact of higher cost of funds.

For some of the banks provisions have been lower due to improvement in asset quality, as non-performing loans have peaked. While HDFC Bank, YES Bank and Kotak Mahindra Bank had lower provisions, Axis Bank and ING Vysya Bank had higher loan loss provisions.

Non-interest income was lower as most banks reported lower profits on their trading book, given the higher yields in government securities and bonds, with the exception of ING Vysya Bank, which had one time investment gains.

HDFC Bank and YES Bank reported higher than expected sequential credit growth (over the June quarter). In case of HDFC Bank it was about 7 per cent and in case of YES Bank it was about 15 per cent. In case of Axis Bank it was about 1.5 per cent, which was more or less in line with the system.

SOURCE: http://www.thehindubusinessline.com/2010/10/23/stories/2010102351970700.htm