For the first time in four-and-a-half years, State Bank of India (SBI), the country’s largest lender, on Monday reported a decline in its consolidated net profit.
The decline was mainly on account of a loss in the treasury portfolio and an around four-fold rise in non-tax provisions. This is the first fall in consolidated net profit since the quarter-ended June 2005.
| SBI FACTSHEET Performance in Q3 ended December (Rs cr) | |||
| 2008 | 2009 | % change | |
| Interest income | 24544.55 | 24948.45 | 1.65 |
| Other income | 4823.59 | 7283.00 | 50.99 |
| Total income | 29368.14 | 32231.45 | 9.75 |
| Interest payments | 16493.78 | 16166.75 | -1.98 |
| Operating expenses | 6433.73 | 9572.66 | 48.79 |
| Total expenses | 22927.51 | 25739.41 | 12.26 |
| Operating profit | 6440.63 | 6492.04 | 0.80 |
| Non-tax provisions | 387.04 | 1454.01 | 275.67 |
| For NPAs * | 670.22 | 869.52 | 29.74 |
| Net profit | 3607.61 | 3304.59 | -8.40 |
| Gross NPA* | 12722.67 | 18861.17 | 48.25 |
| Net NPA* | 6978.25 | 11270.79 | 61.51 |
| * For SBI standalone Source: SBI | |||
On a standalone basis, net profit was 0.03 per cent higher at Rs 2,479.05 crore for the quarter-ended December 2009 compared with Rs 2,478.42 crore a year ago.
The rise in operating income was driven by an increase in net interest income (NII), which is the difference between interest income and interest payments. NII went up by 9.7 per cent to Rs 9,682 crore during the quarter. Non-interest income, which included treasury income, went up by 4.4 per cent to Rs 3,366 crore during the quarter. This was driven largely by a 36 per cent increase in fee-based income.
During the third quarter of the current financial year, the bank had to take a Rs 246 crore mark-to-market (MTM) loss on the bond portfolio compared to a writeback of Rs 342 crore in the corresponding period last year. It was partly the result of its investing a portion of the excess liquidity – estimated at Rs 75,000 crore – into instruments to shore up its statutory liquidity ratio. This exposure resulted in an additional MTM loss of Rs 45 crore during the quarter.
Chairman OP Bhatt has attributed the flat bottom line to servicing excess liquidity with the bank. “The carrying cost of the excess liquidity is Rs 215 crore, while the opportunity cost of investing it in investment and advances is Rs 600 crore,” he said at a press conference.
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The other bad news was the deterioration in asset quality with gross non-performing assets (NPAs) rising over 48 per cent to Rs 18,861 crore at the end of December. However, the bank managed to increase the provision coverage ratio to 56 per cent from 42.85 per cent at the end of September 2009. RBI has mandated banks to raise the cover to 70 per cent by September 2010.
SBI, which had restructured Rs 16,000 crore worth of assets under RBI’s special dispensation scheme, has seen Rs 996 crore, or 6 per cent, of restructured amount slipping into NPA. The bank expects 10 per cent of the restructured loans to become bad assets.
While SBI’s loan growth was slower than its 25 per cent target, the bank saw its gross advances rise 19.15 per cent, or by Rs 97,581 crore, during the quarter.
A faster growth in home loan (29.26 per cent) and auto loan (46.35 per cent) meant that the public sector player’s share in advances went up by 76 basis points (year-on-year) to 16.88 per cent.
Bhatt said the bank had retired Rs 64,000 crore of high-cost deposits during the quarter. In addition, nearly 30 per cent rise in low-cost or current and savings account (Casa) deposits has helped in expanding the net interest margin. While Casa share to the total deposit of the bank increased to 42.94 per cent from 36.58 per cent a year ago, net interest margin expanded sequentially to 2.83 per cent from 2.55 per cent during the July-September quarter.
The bank has aggressively cut down bulk deposits with their share dropping to 2 per cent of total deposits.
Due to an improvement in the cost of funds, SBI said its net interest margin had improved from 2.43 per cent at the end of September 2009 to 2.56 at the end of December 2009.