Private banks reported muted earnings growth in Q3FY25 due to rising bad loans and contracting margins, with ICICI Bank and Kotak Mahindra Bank being only outliers posting double-digit growth in profitability.
Muted growth
HDFC Bank posted 2 per cent year-on-year (y-o-y) rise in Q3FY25 net profit at ₹16,740 crore.Net interest margin (NIM), a key indicator of profitability, was down 3 basis points (bps) sequentially at 3.43 per cent in Q3.Gross and net non-performing asset ratio (GNPA, NNPA) rose 6 bps y-o-y and 5 bps sequentially to 1.42 per cent and 0.46 per cent in Q3,respectively, with NPAs largely emanating from seasonal agriculture loans.
Axis Bank’s Q3 PAT was up 4 per cent y-o-y at ₹6,304 crore, but down 9 per cent on quarter. NIM moderated by 6 bps sequentially to 3.93 per cent. Fresh slippages rose to ₹5,432 crore in Q3 from ₹4,443 crore last quarter, with bulk of NPAs from retail unsecured segment.
Outliers
Meanwhile, ICICI Bank and Kotak Bank were outliers, posting double digit growth in profit. ICICI Bank posted 15 per cent rise in net profit — highest among large private banks — for Q3FY25 at ₹11,792 crore.
Kotak Bank, meanwhile, posted 10 per cent growth in Q3 net profit at ₹3,305 crore, despite the banking regulator’s embargo on bank’s digital and credit card initiatives. Anticipated reversal of the RBI’s ban will aid Kotak’s business growth and maintain healthy margins.
Mid-size banks struggle
IDFC First Bank reported a 53 per cent fall in Q3 profit at ₹339 crore, due to a spike in provisions, especially for micro loans.Overall provisions rose 104 per cent y-o-y to ₹1,338 crore in Q3.
RBL Bank reported 86 per cent fall in net profit at ₹33 crore, led by higher micro loan and credit card slippages. Fresh slippages stood at ₹1,309 crore in Q3, leading provisions to nearly double to ₹1,189 crore.
