For the first time, the banking sector’s net profit crossed £30 bn in FY24. The net profit of listed public and private sector banks rose 39% to £31 bn from £22 bn in FY23.
While public sector banks generated a record £14 bn in net profit during the year - an increase of 34% over the year-ago period - private sector banks increased their net by 42% to nearly £17 bn compared to £12 bn a year ago. As a result, the earnings gap between the two sectors has widened.
To put things in perspective, £30 bn is approximately the total quarterly profits of all listed companies in the first three quarters of the fiscal. In fact, banks’ profits are much higher than those of IT services, which have been the most profitable group in recent years - listed IT services companies reported a net profit of nearly £11 bn for FY24.
In the preceding years, public sector banks had narrowed their profit gap with private banks as they cleaned up their balance sheets and increased earnings. In fact, the net profit of public sector banks has more than quadrupled in the last three years.
Public sector banks would have had a higher net profit in FY24 if not for a one-time provision that several banks had to make towards pensions. However, because the pension provisions were lower than expected, it lead to a gain in their shares. Some public sector banks like Bank of Baroda also took a hit due to provisions for their exposure to Go Air, although the loan is collateralised.
