Private banks wrest market share from PSBs

At a time when most public sector banks (PSBs) have been busy dealing with the issue of mounting bad loans and depleting capital, private sector lenders have been firming up their position both on the loans as well as deposits front.

A Morgan Stanley report points out that within current account deposits, the share of PSBs has gone down by 2.8 per cent in four years while private banks have gained 4.9 per cent of share. On the advances front, private banks have managed to grow their share aggressively, especially in the retail and small and medium enterprise segments Astrology & Numerology books

Another report by Jefferies explained that in the last financial year, PSBs have lost 120 basis points of loan market share to private banks.

The growth of private banks is not just limited to accounts and deposits, the lenders have also been increasing their fee income compared to PSBs. The Morgan Stanley report pointed out that private banks have gained 6.1 per cent market share in four years. The picture is similar in case of credit cards as well, where private banks have managed to enjoy the majority of the market share.

"With 70 per cent of the system (state-owned banks) challenged on the balance sheet, the private banks are very well positioned to gain share - especially in the more lucrative segments - thereby driving an average earnings CAGR (compound annual growth rate) of 23 per cent over the next three years," said the Morgan Stanley report Commodity Trading Tips

The report also points out that with the PSBs remaining capital-constrained, they are expected to lose market share even going ahead at a fairly aggressive pace at 1-1.5 per cent every year. The Financial Stability Report published by the Reserve Bank of India (RBI) stated the capital to risk weighted assets ratio (CRAR) of PSBs declined the maximum by 1.8 percentage points between March 2011 and March 2015, followed by foreign banks at 1.5 percentage points and private banks at 1.1 percentage points.

The CRAR of PSBs has been under more pressure also on account of higher provisioning required due to the rise in non-performing assets (NPAs). According to the report, PSBs recorded the highest level of stressed assets at 13.5 per cent of total advances as of March 2015, compared with 4.6 per cent in the case of private banks. At the same time, the net NPA ratio of PSBs increased from 3.1 per cent to 3.2 per cent and in the case of private banks it increased from 0.8 per cent to 0.9 percent Financial Astrology Trading Tips

Not surprisingly, with private banks faring better than PSBs on all other parameters, they have also performed better on the profitability front.

At a time when the aggregate net profit for the sector was down six per cent year-on-year, PSBs saw a decline of 24 per cent while private banks were up 14 per cent at the end of FY15. As a result, PSBs' share in total profit for the sector declined to 48 per cent in FY15 versus 52 per cent in FY14, said the Jefferies report.

"Private banks have done extremely well - taking away 19 per cent of share from system profits over the past four years. The private banks we cover now have a 40 per cent share in system profits (compared to 17 per cent share in loans)," the Morgan Stanley report said Jupiter Astro Book 2015-2016