India’s banks show the impact of a buzzing economy and digital uplift
Credit growth is a key driver of stellar earnings from India’s banks as the country completes its recovery from Covid-19, but another driver is digital traction.
India’s banks have successfully anchored their performance to one of the world’s most vibrant economies. First-quarter bank earnings show dramatic growth as the country’s businesses and retail consumers have left the pandemic behind, powered by a compelling domestic story resilient to global shocks.
On Saturday, ICICI reported a 39.7% year-on-year increase in profit after tax, to $1.2 billion equivalent for the first quarter. The same day, Kotak Mahindra Bank trumped it with a 50.6% rise in consolidated profit to $506 million, or 66.7% on a standalone basis for the bank. On July 17, HDFC Bank, in its first earnings after its merger with its parent Housing Development Finance Corporation, had reported a 30% increase in standalone net profit for the quarter to $1.45 billion.
All are reporting steady or improving asset quality – net non-performing asset (NPA) ratios of 0.48%, 0.43% and 0.3%, respectively – and provision coverage. They reflect an industry-wide picture. In June, the Reserve Bank of India (RBI) put out a report on the stability and resilience of the Indian financial sector, noting: “Even as the [net and gross non-performing loans (NPLs)] of scheduled commercial banks declined to a decadal low, the system-level capital to risk-weighted assets ratio reached a new high.