The country’s largest lender, State Bank of India (SBI), today reported a 21 per cent drop in consolidated net profit for the quarter ended March on the back of higher provisions and operating expenses. On a standalone basis, net profit fell almost 32 per cent.
Consolidated net profit for the three months to March stood at Rs 2,620 crore as against Rs 3,329 crore in the year-ago period. Standalone net profit was at Rs 1,870 crore as compared with Rs 2,742 crore in the corresponding period last year, the bank said today.
SBI shares tumbled 4 per cent on the Bombay Stock Exchange to close the day at Rs 2,222.65. The exchange’s benchmark index, the Sensex, lost 1.57 per cent during the day.
The total provisions made by the bank in the quarter was Rs 3,327 crore against Rs 2,535 crore in the fourth quarter of 2008-09, a rise of about 31 per cent.
The other income of the bank, that includes profits on sale of investment, was down 4.4 per cent at Rs 4,509 crore due to a 72 per cent decline in profit on sale of investments over the corresponding period last year. In the fourth quarter of 2008-09, SBI had booked a profit of Rs 1,508 crore on investment sale.
Along with this, operating expenses grew by 40.93 per cent due to rise in salary of new employees, wage revision and ATM expansion among other reasons.
SBI Chairman O P Bhatt said: “There is a liquidity overhang of Rs 40,000 crore as of March 2010, the negative cost of carrying on account is Rs 273 crore. The provisioning for pension and other staff expenses in the last quarter was about Rs 547 crore, and NPA (non-performing assets) provisioning was Rs 1,600 crore.”
“In the earlier quarter (Q4 2008-09) the treasury gave us over Rs 1,000 crore, which is not there,” Bhatt added while explaining the reasons behind the fall in profit.
SBI's net interest income for the fourth quarter rose by 38.82 per cent to Rs 6,721 crore as compared with Rs 4,842 crore in the same period last year, the highest in absolute terms in the last eight quarters, the bank said in a statement.
The bank's asset quality improved over the past quarters, though Rs 647 crore was added as fresh NPA in the quarter ended March.
“In Q2 the net slippage was over Rs 2,000 crore, in Q3 it was Rs 1,400 crore, and in the last quarter it was Rs 647 crore. The incremental NPA level is going down. But, some of the existing NPAs are aging, and that will require higher provisioning. Baring agriculture, the amount of NPA will keep going down, but the provisioning requirement may remain the same over the next few quarters,” said Bhatt.
The bank's provisioning coverage ratio in the last quarter stood at 59.23 per cent, against 56.19 per cent in the quarter ended December 2009.
The Reserve Bank of India (RBI) has asked banks to raise the cover to 70 per cent by September 2010.
“We are in dialouge with the RBI on time period. Roughly, the provisioning requirement will be between Rs 3,500-4,000 crore,” said Bhatt.
Last quarter saw Rs 1,062 crore of fresh NPA addition from corporates, while on the retail front, NPA reduced by Rs 332 crore.
Out of the standard restructured assets of Rs 16,796 crore restructured under RBI dispensation, Rs 1,616 crore slipped into NPA category up to March 2010, taking the slippage ratio for these to 9.62 per cent, the bank said in the statement.
On advances side, SBI maintained 16.28 per cent market share, against 15.99 per cent as on March 2009. The credit deposit ratio of the bank increased to 73.56 per cent as on March 10, 2010, from 66.63 per cent last year.
Home loans grew by 31.68 per cent on a yearly basis and auto by 45.44 per cent.
The net interest margin of the bank improved to 2.96 per cent in the quarter ended March against 2.39 per cent in the year-ago period.
The cost to income ratio for the bank increased to 52.59 per cent as on March 2010, against 46.62 per cent as on March 2009 due to higher operating expenses, recruitment, pension and lower profits from sale of investments.
For the full year, group net profit of the bank was Rs 11,734 crore, up by 7.11 per cent from Rs 10,955 crore in FY09.
