SBI net slips 45.6% for first quarter

Higher investment depreciation, loan loss provisions take a toll. Bank says won’t require more provisions.

The country’s largest lender, State Bank of India (SBI), on Sunday reported a 45.66 per cent fall in its net profit for the first quarter of this financial year, on account of higher investment depreciation and loan loss provisions. The bank, however, has expressed hope it will not require further provisioning in the coming quarters and a part of what was made earlier will come back.

SBI’s net profit in the April-June quarter this year stood at Rs 1,584 crore, against Rs 2,914 crore in the same period of 2010-11.

The Mumbai-based bank had made provisions of Rs 5,659 crore during the quarter, against Rs 3,220 crore in the year-ago period — an increase of 75.73 per cent. Provisions against bad loans increased 60.48 per cent, to Rs 2,782 crore, while provisioning on investment depreciation increased 451.29 per cent, to Rs 1,048 crore.

“We had to make higher loan provision as per the stiff prudential provisioning norms of the Reserve Bank of India across all grades of assets," SBI Chairman Pratip Chaudhuri told a press conference. He, however, was hopeful the bank would not need to make further provisioning in the coming quarters.

“We will not be required to make further provisioning. Of what we have made so far may partly come back (in the coming quarters),” he said.

Gross non-performing assets (NPAs) of the bank increased to 3.52 per cent of the advances, compared to 3.14 per cent in the same quarter last year. Net NPAs on the other hand fell to 1.61 per cent from 1.7 per cent.

The operating profit of SBI increased 18.06 per cent to Rs 7,242 crore. Total income for the quarter, however, increased by 25 per cent to Rs 27,732 crore. The bank expects an operating profit of Rs 7,000 crore and net profit of Rs 2,500 crore in the second quarter.

SBI’s net interest income (NII) increased 32.80 per cent to Rs 9,700 crore, an all time high, compared to Rs 7,304 crore in the first quarter of last year. Net interest margin (NIM) for the June quarter was at 3.62 per cent.

“Increase in NIM is encouraging as it is more stable… We have exceeded our guidance of 3.5 per cent on NIM. Going forward we expect to maintain NIM of 3.6 per cent, if not better, because we do not have any pressure on the deposit side,” Chaudhuri said.

The bank’s capital adequacy ratio was at 11.6 per cent at the end of the quarter, down from 13.12 per cent at the end of the June quarter in 2010-11. It saw 16.53 per cent rise in its deposits and 18.73 per cent growth in advances. It expects deposits and advances to grow 20-21 per cent and 16-19 per cent, respectively, in the current financial year. The bank said its market share in advances had increased, while in deposits it had decreased on quarter-on-quarter (QoQ) basis.

On consolidated basis, the bank's net profit was down 25.3 per cent to Rs 2,512.4 crore in the quarter, against Rs 3,365.2 crore in the year-ago period. The consolidated total income increased to Rs 39,126 crore in April-June quarter of 2011 from Rs 32,808 crore in the same period last fiscal. SBI stock on BSE was down 56.85 points at Rs 2,193.45 on Friday.