High provisioning for bad loans, subsidiaries' weak numbers dent profit.
The State Bank of India (SBI) Group on Monday posted 10.5 per cent growth in net profit at Rs 2,378 crore in the second quarter of 2008-09 as against Rs 2,150 crore in the same period last year. The lower growth in profit was mainly on account of higher provisioning towards bad loans and poor performance of some its subsidiaries.
However, riding on higher interest and fee income, the standalone SBI net profit (after minority interest) grew by a whopping 40 per cent at Rs 2,260 crore during the July-September quarter compared with Rs 1,611 crore in the corresponding period last year. “We have beaten the market expectations,” SBI Chairman and Managing Director O P Bhatt said.
| UNDER PRESSURE Performance in Q2 ended September 30 | |||
|
In Rs crore | |||
1,08,881
The bank has made a provisioning of Rs 911 crore, of which Rs 400 crore is towards farm loans and Rs 206 crore for State Bank of Saurashtra’s merger with the parent bank. The bank has also made a provisioning for its $10-million (Rs 47 crore) exposure to the erstwhile Lehman Brothers.
Of SBI’s group businesses, credit card has booked a loss of Rs 28 crore, while associate banks have virtually seen no growth in net profit in the period under review.
However, on a standalone basis, SBI’s net interest income (NII) grew by 45 per cent to Rs 5,455 crore. The net interest margin (NIM) rose to 3.16 per cent from 3.01 per cent a year ago. However, NIM is likely to come under pressure, going forward, due to the high cost of funds raised in October.
“The net interest margin may be lower in the coming quarter and lower NIM may impact profit. However, NIM is likely to remain around 3 per cent,” Bhatt told reporters here.
Many banks, including SBI, have raised bulk deposits at a higher cost in October to tide over a severe liquidity crunch and they are likely to get reflected in the December quarter. Among others, fee-based income grew by 41 per cent to Rs 1,331 crore during the period.
SBI’s advances grew by a massive 162 per cent to Rs 51,020 crore in the second quarter this financial year over Rs 19,447 crore in the corresponding period last year. Denying reports that banks are turning down credit demand from industry, Bhatt said, “I think that may be a perception in some quarters, but it is not correct for SBI.” SBI is likely to post 26 per cent credit growth in 2008-09, he added.
The total income of the bank grew by 31 per cent to Rs 17,909 crore during the Q2 this financial year as against Rs 13,658 crore in the year-ago period. The total business (deposits and advances) doubled to Rs 1,08,881 crore during the quarter as against Rs 53,901 crore in the corresponding quarter last year.
Gross non-performing assets (NPAs) of the bank improved to 2.51 per cent from 2.54 per cent, while its net NPAs also improved to 1.34 per cent as against 1.42 per cent a year ago.
The Capital Adequacy Ratio (CAR) of the bank stood at 11.51 per cent, according to the Basel-II norms, which is likely to go up by 269 basis points if the bank gets its corporate loans rated by a rating agency, Bhatt said. About 80 per cent of its corporate debts are not rated due to non-availability of rating agencies, he said. “We have a headroom for raising Rs 18,000 crore in tier-II bonds, which can also take care of additional capital requirements,” Bhatt added.
