Public sector banks beat private peers in net profit growth in Q2 amid sharp fall in provisions: SBI Report

Public sector banks (PSBs) in India have posted significantly higher net profit growth compared to their private counterparts in the second quarter of FY25, according to a recent report by the State Bank of India (SBI). The data suggests that PSBs demonstrated robust resilience and strategic adaptability, even in a highly competitive banking environment, as per ANI.

The SBI report noted, "In terms of profitability, PSBs have trumped the PVBs by a wide margin on YoY basis." Public banks collectively achieved a 39.3 per cent year-over-year (YoY) increase in net profit, a substantial lead over the 7.1 per cent growth posted by private sector banks during the same period, the report added.

Among public sector banks, Punjab National Bank (PNB) reported an impressive 145 per cent YoY increase in net profit, driven largely by a sharp reduction in new provisions and contingencies. This led to a nearly 2.5 times surge in PNB’s bottom line for the quarter. Other PSBs also recorded significant profit growth, with the Central Bank of India reporting a 50.9 per cent rise, UCO Bank at 50 per cent, and Bank of Maharashtra showing a 44.2 per cent increase, as per ANI.

These gains underscore the operational improvements made by PSBs, which have focused on efficiency, enhanced portfolio management, and meeting the growing demand for credit in a recovering economy. The report highlights that reforms and increased government support have played a critical role in bolstering the profitability of public banks.

Private banks

In contrast, private sector banks saw more modest profit growth in Q2 FY25. Axis Bank led the group with an 18 per cent rise in profits, followed by ICICI Bank at 14.5 per cent. HDFC Bank and Kotak Mahindra Bank showed smaller gains of 5.3 per cent and 4.8 per cent, respectively, while IndusInd Bank recorded a notable profit decline of 39.6 per cent.

Despite slower profit growth, private banks maintained stronger Current Account Savings Account (CASA) ratios, with Kotak Mahindra Bank leading at 43.6 per cent and ICICI Bank close behind at 40.6 per cent. Among PSBs, the Bank of Maharashtra posted the highest CASA ratio at 49.3 per cent, indicating a robust deposit base that supports its lending activities.

Private banks also outperformed PSBs in terms of advances growth, registering a 14.9 per cent increase in loans and advances, compared to the 9.8 per cent growth achieved by public banks. However, some public banks displayed considerable advance growth, with Indian Overseas Bank and Bank of Maharashtra reporting increases of 13.8 per cent and 15.5 per cent, respectively. This shows that PSBs are actively expanding their credit portfolios to meet rising demand, particularly in sectors driven by economic recovery.

Overall, the Q2 FY25 results signal a shift in the Indian banking landscape. While public banks are improving profitability through operational reforms, private banks continue to leverage high CASA ratios and a strong focus on advances to sustain growth. This dynamic underscores the unique strategies each segment employs to navigate market pressures and capitalise on emerging opportunities.

(With inputs from ANI)