State Bank of Indias net profit rose 9.97 per cent to touch Rs 704.70 crore in the first half of 1997-98, compared with Rs 640.80 crore in the corresponding period of the previous year.
Announcing the results after the banks board meeting yesterday, SBI chairman M S Verma said, The bank has arrived at the net profit without considering any add-backs and profits on account of sales of investments.
The average yield on advances dropped to 12.5 per cent in the first half of 1997-98, from 14.25 per cent in the corresponding period of the previous year, due to the recent downward trend in interest rates.
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Pure advances by the bank as of end-September 1997 stood at Rs 53,684 crore, 2.43 per cent below the end-March 1997 figure. However, the total flow of credit to the industrial sector increased 8.87 per cent to Rs 63,606 crore in the same period.
Verma told a press conference that credit would pick up substantially in the balance period of the current fiscal, which would be reflected in the banks performance. Indications are available from industry that credit will take off as most of the problems related to the power sector have been sorted out. Although telecom financing has slowed down, people have stated taking credit decisions on projects related to port, road and refineries, he said.
He also ruled out any further reduction in interest rates in the near future, which means that the yield on advances will stay high or increase. I dont see interest rates falling in the immediate future but they will soften in the medium term, only by October 1998, he said.
Interest income on advances declined Rs 263 crore, or 6.74 per cent, due to the decline in average yield. However, this decline was offset by the increase in interest income on domestic resources operations, which rose Rs 250 crore due to volume growth.
The return on assets continues to stand at the earlier level of 0.88 per cent, while non-performing assets too remained unchanged at 7.3 per cent. The NPA is at the same level as the increase in actuals has been neutralised by recoveries, said Verma.
Provisions and contingencies fell from Rs 1,066 crore to Rs 658.14 crore. Of this, the bank provided Rs 272 crore as income tax, Rs 66 crore as interest tax and Rs 275 crore for bad loans. Operating expenditure increased 4.19 per cent to Rs 4,974.28 crore in the first of the current fiscal.
The average yield on government securities rose from 11.78 per cent in 1996-97 to 11.90 per cent in 1997-98. On an annualised basis, the average yield on advances declined 1.74 per cent during the first half of the current year. The average yield on investments declined 0.53 per cent in the same period.