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Home, auto and personal loans drive bank results in Q2 to clock in over 20% in net profit

Home, auto and personal loans drive bank results in Q2 to clock in over 20% in net profit

Author | Collin Furtado | Friday, Nov 27,2015 9:10 AM

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Home, auto and personal loans drive bank results in Q2 to clock in over 20% in net profit

The BFSI sector, a major contributor to economy as well as advertising spends, has been burgeoning in the past quarter, especially the private sector. As the second quarter results of banks were recently announced we take a look at the results to not only see how much the ad and promotional spends increased, but also how much they have grown.

BFSI clocks in high net profits of 20%+ on strong growth of home, car and personal loans

Private sector banks are the top ad spends contributors in the BFSI segment including ICICI Bank, Kotak Mahindra, HDFC Bank, Axis Bank and Yes Bank. Most of them saw high over 20% growth in their net profit in Q2. The reason for this was strong growth in home, automobile and personal loans, healthy net interest income (NII) growth which is a difference between interest earned and interest expended and other income growth. 

For instance, ICICI Bank, which is India’s biggest private sector lender in terms of assets, saw its Q2 net profit increased by 12%. The net profit of the bank increased to Rs.3,030 crore during the first quarter this year from Rs.2,709 crore during the same quarter last year. The reason for this is the increase in people going for home loans, car loans and other personal loans. Retail loans rose by 25% year-on-year which has helped the bank grow at a time when there is a slow demand for corporate loans. The bank’s total income grew by 8.2% in Q2FY2016 from the same quarter last year.

HDFC Bank, which the second largest private sector bank in India, too saw a large double-digit growth of 20% in its net profit to stand at Rs.2,869 crore during the second quarter from Rs.2,381 crore in the same quarter last year. The total income of the bank grew by 24.68%. The high growth was driven similarly by loans to individuals which grew by 29% and also a 25% growth in loans to companies.

Kotak Mahindra Bank on the other hand saw its net profits increase by 31.2% as it grew to Rs.941.89 crore in the September ended quarter this year against Rs.717.93 crore during the same quarter last year. The reason for this high growth is the inclusion of the results from the operations of ING Vysya Bank which was integrated with it last quarter. The company had incurred a large loss last season due a provision for the integration of ING Vysya into Kotak Mahindra Bank. The bank’s total income rose by 36.7%.    

Yes Bank, like ICICI Bank and HDFC Bank, saw a very positive second quarter as its net profit grew high double-digits to over 26% in the September ended quarter to Rs.610 crore compared to Rs.483 crore during the same quarter last year. This was helped by the strong growth in the net interest income which was up by 29% to Rs.1,109 crore.

Axis Bank saw its net profits increase by 19% during the quarter to Rs.1,916 crore from Rs.1,611 crore a year earlier. The total income also increased by 13.7% in comparison with the same quarter last year. The reason for the good performance during the quarter was due to the lending to individuals for cars and homes which have tripled for the bank.

High double digit growth in ad spends expected

The private banks during this quarter also saw a large double-digit growth in their other operating expenses which includes a large part of the advertising and promotion spends.

ICICI Bank’s other operating expenses (which includes ad and marketing spends) increased by 17.2% in the September quarter as against the same quarter last year. In Q2FY2016 it grew to Rs.1,887.8 crore from Rs.1,610.7 crore in Q2FY2015. The total expenditure saw a growth of 7.4% as compared to the second quarter last year.

HDFC Bank’s other operating expenses saw a large rise of 19.1% in comparison to the same quarter last year. It also includes the ad and promotion spends and can be seen as rise in it during the quarter. The total expenditure of the company also saw a large increase of 24.8% as against the corresponding quarter last year.

For Kotak Mahindra, the total other operating expenses which includes brokerage, depreciation, rent, taxes and lighting and others increased by 37%. The others expenses (which includes ad and promotion spends) in total operating expenses saw an increase of 36.7% during the quarter. It can be recalled that the bank’s securities division was running the ‘Agar Magar Se Aage Badho’ campaign during the period. The campaign seen present heavily digital and social media with outdoor and print also being used to promote their products.

Yes Bank’s other operating expenses (includes ad and promotion expenses) of the bank also saw a large growth during the period as it rose by 29% in comparison with the same quarter last year. It increased to Rs.394.65 crore during this quarter from Rs.305.90 crore during the same quarter last year.

Axis Bank’s other operating expenses of the bank increased by 8% to Rs.1,646.23 crore during the quarter from Rs.1,524.18 crore during the same quarter last year.

The third and fourth quarter are expected to see a rise in ad spends. With the second quarter too churning out high net profits it is expected that ad spends too will rise in the coming months. 

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