Other income rose a healthy 51.48 per cent, while provisions and contingencies registered a marginal 3.87 per cent rise. Interest income has increased by 34.52 per cent, while interest expenditure moved up by 44.57 per cent.
The quality of earnings was much better for the private sector banks compared to banks in the public sector. The net profit of 18 private banks rose 48.94 per cent, while 25 public sector banks posted 38.63 per cent rise in net profit.
Public sector banks registered better growth in other income (up 56.1 per cent) compared to private banks (up 44.21 per cent). The cost of borrowing and deposits continued to be higher for both private as well as public sector banks. Interest cost of public sector banks was at 43.76 per cent, while it was at 46.91 for private banks.
The net interest income (NII) of the banking sector rose 27.7 per cent, while it increased by 44.75 per cent for private banks and 20.87 per cent for public sector banks.
The increase in NII for private sector banks is attributed to recent capital infusion by new private banks to retire high-cost deposits. The public sector banks suffered on high cost of loans and deposits.
The third quarter study of banks' results by IIFL Research indicate that the margins for the banking sector as a whole remained under pressure. The strong growth in NII for private banks attributed it to low cost capital infusion.
According to study by IIFL Research, banks are taking higher risk to increase NII as reflected in the rising share of unsecured loans. Unsecured lending is on the rise, to offset the slowdown in traditional products like mortgages and vehicle loans.
The retail loan growth declined 12 per cent for ICICI Bank, while its share of unsecured personal loans rose from 14 per cent in 2006-07 to 17 per cent in nine months of 2007-08.
The share of unsecured personal loans for Axis Bank increased from 11 per cent to 16 per cent, while it was marginally higher at 24 per cent for HDFC Bank.
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