N.S. Vageesh

Chennai May 2 Public sector banks have posted a 33 per cent growth in profits in fiscal 2006-07. Twenty-two public sector banks, including IDBI, have reported profits of about Rs 11,539 crore in a year marked by robust economic growth and resultant loan expansion.

The results of six other banks, including SBI and Punjab National Bank, are awaited.

In the fiscal 2005-06, all public sector banks had seen their profits grow 13 per cent to about Rs 21,500 crore.

In keeping with past patterns, the cumulative results mask a wide variation in performance across individual banks — from a mere 4 per cent increase in profits in the case of Oriental Bank to an over five-fold increase in the case of Bank of Maharashtra.

The huge deviation from the median figure for many banks is accounted for either by a poor performance in the earlier years or the result of extraordinary items, recoveries that were written off earlier or huge provisioning made for bad debts.

Banks remain cagey about the details of why their performance has been spectacular or disastrous.

`Other income'

The growth in profits for these 22 banks in fiscal 2007 has come on the back of a 25 per cent growth in interest income but a mere 5 per cent growth in "other income" (basically earnings from commission, exchange brokerage, profit on sale of land or buildings or other assets, revaluation of investments, income earned from subsidiaries, etc.).

In the past when bank profits have been high, the contribution of "other income" was significant.

There was an element of an extra-ordinary item of a non-recurring nature in these contributions and, therefore, the fear over its sustainability in the succeeding years. The profits this year seem to be on a relatively healthier wicket.

Growth in loans

The sharp growth in loans (an average growth of 30 per cent over the past four years) has seen the proportion of banks' interest income rising to about 88 per cent of total income from about a level of 79 per cent four years ago.

The contribution of "other income" has correspondingly come down to about 12 per cent from about 21 per cent earlier.

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