Indian banks to disclose 5.35% plunge in profits

Bank of America-Merrill Lynch report says state-run banks to be hardest hit.

The firm said the net profit drop will be for the period January-March of the past fiscal year. It blamed wage revisions, tax reversals and lower core income for the distressing results.

BofA-ML said state-run banks are set to report a drop in headline profits while private lenders will report good numbers.

"We are likely to see state-run banks' earnings disappointing at net profit level with a decline of 5-35 percent y-o-y, as they are to provide for wage revisions, and many of them had tax reversals/write-backs in Q4 of last fiscal owing to higher provisions." it said.

Private banks are to report net profit growth from 20% to 30% driven by retail lending since most did not cut retail rates. Asset quality of most private lenders will be largely comfortable.

BofA-ML said State Bank, the largest lender, could surprise on volumes and recoveries but margins will be weak, showing a 7% to 8% year-on-year drop in net profit due to higher wage provisions and decline in margins.

Among other larger state-run banks, headline earnings are expected to be down by 5% to 25% owing to higher taxes, while their operating profits may be flat to 25%.