The increased cost of deposits impacted net profit of banks, which increased at a slower rate of 16.1 percent as compared to 23.2 percent during the previous year. Interest expended on deposits, along with increase in proportion of high cost term deposits, led to acceleration in the interest cost of banks. Net Interest Margins of banks dipped marginally compared to the previous year.
An analysis of profitability of banks, however, reveals that profitability of foreign banks is higher than that of other bank groups. Though their share of total assets of the banking system stands around 7 percent, foreign banks account for close to 12 percent of profits of SCBs.