SBI net grows 22%, shares touch 19-year high

State Bank of India (SBI) on Thursday said consolidated net profit for the group went up by 21.99 per cent to Rs 3,356.26 crore during the quarter ended June, compared to Rs 2,758.5 crore during the corresponding period last year.

On a standalone basis, the country’s largest lender reported a 25.05 per cent rise in net profit to Rs 2,914.2 crore, thanks to a reduction in interest expenses and a 51 per cent decline in employee cost. This was the highest profit growth for the bank in four quarters. A large part of the reduction in payment to employees was on account of write back of provisions made for increase in wages.

Interest expenses fell by 10.44 per cent, essentially due to the strategy to retire half its high-cost bulk deposits. SBI said the share of current account and savings bank account balances (Casa) in total deposits went up to 47.51 per cent at the end of June, from 38.45 per cent a year ago. This was on account of Rs 27,700 crore accretion in savings bank deposits.

The bank managed to see a sharp rise in net interest income despite a 5.61 per cent increase in interest income. The bank’s net interest income went up by 45.35 per cent to Rs 7,304 crore and more than offset the 75 per cent decline in profit from investment.

As a result of a 27 per cent increase in operating income and a marginal decrease in total operating expenses, the bank’s operating profit rose by nearly 67 per cent to Rs 6,134 crore.

SBI shares gained 6.93 per cent to close at Rs 2,784 on the Bombay Stock Exchange (BSE) today, after touching an intra-day high of Rs 2,797.85, the highest since January 1991. The bank’s shares have gained 63 per cent in the past year, surpassing the 20 per cent rise in the BSE Sensex, according to data compiled by Bloomberg.

During the last quarter, the bank’s profit had remained flat due to a bulge in operating expenses and provision for bad debt. During the first quarter of the current financial year too provisions remained high with total non-tax provisions, net of write-offs, rising to Rs 1,551.37 crore, as against Rs 172.73 crore during April-June 2010. Provisions for non-performing assets rose by 29 per cent to Rs 1,733 crore for the quarter ended June 2010.

The bank continued to see a build-up of non-performing assets, with the gross stock rising to Rs 20,825 crore, compared to Rs 15,318 crore a year ago. During the quarter, of the Rs 1,290 crore accretion to the stock of gross NPA, Rs 683 crore was on account of farm loans, of which more than half related to the farm debt relief scheme announced by the UPA government ahead of the general elections.

Despite the higher provisions, SBI’s provision coverage ratio was 60.7 per cent at the end of June 2010, compared to 62.16 per cent a year ago and less than the RBI-mandated level of 70 per cent. SBI Chairman O P Bhatt told reporters that the bank had time till September 2011 to comply with the norms.

The good news was that SBI’s net interest margin rose to 3.18 per cent from 2.96 per cent at the end of March.

Bhatt, however, said that there will be an pressure going forward as there was an upward bias in interest rates, both for lending and deposits. He, however, added that the bank hoped to maintain its NIM at around the same levels this year.

Besides, he said that SBI was looking at 21-22 per cent growth in advances, which went up by 20.74 per cent to nearly Rs 5.5 lakh crore.