Top 5 Banks for 2024 – Add to your watchlist

The aggregated data for 24 banks reveals substantial financial metrics, with a total net revenue of approximately Rs 3 Lakh crore, highlighting the collective income. The Profit After Tax (PAT) stands at Rs 58,008 crore, reflecting cumulative profitability. Net Interest Income (NII), a crucial indicator for financial health, is reported at Rs 1.4 lakh crore, representing earnings from interest-related activities. Gross advances, indicating total loans, reach Rs 94,80,567.59 crore, and customer deposits total Rs 1,08,72,438.63 crore or Rs 10.8 trillion. This comprehensive overview delineates the collective financial performance of the 24 banks.

The article delves into the Q3FY24 results of the top 5 banks, focusing on Return on Assets (ROA) and Net Interest Margin (NIM) to assess profitability and operational efficiency.

ROA Analysis 

ROA, or Return on Assets, is a financial gauge showcasing a company’s profitability relative to its total assets. It’s a percentage calculated by dividing net income by average assets. A higher ROA indicates effective management, efficiently turning assets into profits. Here’s a detailed analysis of the Q3FY24 ROA data for the selected banks:

The Return on Assets (ROA) data for Q3FY24 reveals notable improvements for several banks, reflecting enhanced efficiency in asset utilization. South Indian Bank demonstrated a remarkable increase from 0.56% to 1.07%, marking a substantial 51 basis points (bps) improvement. IDBI Bank and Karur Vysya Bank also exhibited positive trends, with 48 bps and 39 bps growth, respectively.

Punjab National Bank (PNB) and Union Bank witnessed noteworthy gains of 41 bps and 34 bps, showcasing a positive trajectory in their ability to generate profit from their total assets. This data signals a promising outlook for these banks in terms of operational efficiency and profitability.

NIM Analysis 

Net Interest Margin (NIM) gauges a financial firm’s profitability by comparing the income it earns from loans with the interest it pays on savings. Represented as a percentage, NIM signals the potential success of a bank or investment firm in the long run. For investors, a higher NIM is favourable, as it reflects stronger earnings from core revenue sources like investments and interest. Essentially, NIM serves as a crucial indicator of a financial institution’s earning quality.

Net Interest Margin (NIM) is a key profitability indicator, gauging the efficiency of a financial institution’s interest income against interest expenses. The Q3FY24 NIM data for the selected banks is outlined below:

RBL Bank led the pack with a substantial increase in NIM, soaring by 78 basis points (bps), showcasing robust financial performance. Bank of Maha also demonstrated a commendable rise, boasting a 35-bps uptick, affirming sound operational capabilities. Central Bank made a noteworthy recovery, transitioning from a negative to a positive NIM, registering a 19-bps growth.

IDBI Bank and Karur Vysya Bank exhibited moderate gains, signalling stable performance with 13 bps and 9 bps increases, respectively. These NIM metrics highlight the nuanced changes in interest income, crucial for assessing the core revenue quality of these financial institutions.

What does the data tell us? 

The analysis of ROA and NIM data reveals intriguing patterns. IDBI Bank emerges as a star performer, exhibiting substantial growth in both ROA and NIM.

The analysis highlights some intriguing trends, particularly the stronger performance of public sector banks compared to private sector banks. Notably, South Indian Bank, classified in the midcap sector, has emerged as the leading performer (in ROA) among all banks reporting Q3 numbers so far. This suggests a noteworthy achievement for a mid-sized bank in outperforming its larger counterparts in the current reporting period.

The absence of major banks like HDFC Bank, Kotak Mahindra Bank, Axis Bank, and other industry giants from the top 5 list emphasizes the superior performance of these emerging banks.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.