Banks likely to lose Rs 11,790 CR in Q1 on the bond rally, says report

Banks likely to lose in Q1 on bond rally says report

Banks are unlikely to take a big hit in profitability this quarter due to rising bond yields, which the report said could eat up to 5.3 percent (Rs 11,790 crore) of their net income in the worst-case scenario. In the worst-case scenario, banks may see a profit erosion of 2.6 percent of their operating profit before provisions and 5.3 percent of their after-tax profit from losses to the treasury in the 1st quarter, India Ratings said on Friday.

During the first quarter, bond yields rose 61 bps to peak at 7.5 percent.

That’s because a 100-basis point year-over-year upward shift in the yield curve can affect system-wide operating profit before adjustments by 4.5 percent and return on assets by just 9 basis points, the agency said.

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