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Banking industry

Banks Stare at Falling Fee-Based Income in June Quarter

Strategic Insights

— 1 min read

The Covid-19 pandemic has led to a significant drop in new loan applications and sales of third-party products, impacting fee-based income for banks. Fee income constitutes a substantial portion of non-interest revenues for private sector lenders, with forecasts indicating a major hit to this revenue source. HDFC Bank, the country's largest private sector lender, reported a 37% drop in fee income to Rs 2,231 crore, with Federal Bank also seeing a 34% decline in its fee income.

Key Takeaways:

  • Fee income for HDFC Bank dropped 37% to Rs 2,231 crore from Rs 3,553 crore in the same period last year.
  • Federal Bank saw its fee income falling 34% to Rs 171 crore.
  • Fee income constitutes a major chunk of non-interest revenues for banks, particularly private sector lenders.
  • Analysts feel private sector banks will be more affected compared to their PSU counterparts due to higher contribution of fees to their other income.
  • In the pre-Covid era, fee income accounted for 68% of HDFC Bank's non-interest income, 73% of Axis Bank's, and 89% of ICICI Bank's.

Statistics:

  • 37%: Drop in fee income for HDFC Bank.
  • Rs 2,231 crore: HDFC Bank's fee income.
  • Rs 3,553 crore: HDFC Bank's fee income in the same period last year.
  • 34%: Drop in fee income for Federal Bank.
  • Rs 171 crore: Federal Bank's fee income.
  • 68%: Contribution of fee income to HDFC Bank's non-interest income in the pre-Covid era.
  • 73%: Contribution of fee income to Axis Bank's non-interest income in the pre-Covid era.
  • 89%: Contribution of fee income to ICICI Bank's non-interest income in the pre-Covid era.
  • 25%: Maximum fall in other income for banks on a sequential basis.

Sources:

  • "HDFC Bank 4QFY20 Result Analysis - Nischay Candadevudu", HDFC Securities, 2020.
  • "HDFC Bank quarterly results", The Hindu BusinessLine, 2020.
  • "Federal Bank reports 34% drop in non-interest income in Q1", The Economic Times, 2020.
  • "How economic slowdown is impacting banks' fee income - FII", CNBC-TV18, 2020.

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