SBI: Slight slippage

State Bank's numbers bare deceleration

The State Bank of India's (SBI) growth seems to have slowed down a bit in the last quarter. Nowhere is this more apparent than in deposits.

Deposits were at Rs 3,56,643 crore at the end of March 2005, a marginal rise from the Rs 3,50,630 crore at the end of last December.

As a result, deposit growth, which was 15.97 per cent for the first nine months of FY 2005, fell to 12.24 per cent for the year as a whole.

Advances growth, too, has decelerated, but that was due to a spurt in advances in the year ago period. Net interest income growth has continued in Q4. NII for the year as a whole was up 24.66 per cent, compared with 26.94 per cent growth in the first nine months.

Net interest margin, at 3.28 per cent in the first nine months, improved to 3.39 per cent.

The net NPA percentage has deteriorated a bit, from 2.56 per cent at end-December to 2.65 per cent at end-March, although, importantly, the gross NPA percentage has come down from 6.5 per cent to 5.9 per cent in the last quarter.

The rate of growth of non-interest income (other than profit on sale of investments) too has come down from 25.28 per cent in the nine-month period to 17.75 per cent.

The upshot has been that there has been some slippage in the bank's key performance indicators (annualised) compared with the position as at end-December, 2004.

To illustrate, the return on average assets for the full year is 0.99 per cent, below the 9-month period's 1.01 per cent; Return on Equity fell from 18.4 per cent to 18.1 per cent; and annualised earnings per share went down from Rs 82.07 for the nine months to December 2004 to Rs 81.79 for FY 05 as a whole.

Nevertheless, the continuation of strong advances and net interest income growth, together with the sharp dip in the need to make provisions for NPAs continue to augur well for SBI, a fact reflected in the 1.7 per cent rise in the stock on Friday.

Thomas Cook""the tsunami effect

Thomas Cook India has reported a 31.4 per cent drop in its consolidated profit before tax for the March quarter. That's largely due to income from operations remaining more or less stagnant in the March quarter, coupled with a rise in input costs.

The chief reason is the tsunami in late December, which hit travel bookings to south-east Asian countries. However, the company's efforts to promote destinations within the country and alternative destinations like South Africa have shown signs of paying off.

As a result, the company was able to grow revenues at its key travel and related services division by 3.6 per cent in the last quarter.

However, the company could not prevent a 14.9 per cent drop in segment revenues at its financial services division.

Operating costs have also risen in the March quarter "" consolidated advertising costs have grown 23 per cent. In addition, the general upward pressure seen for salaries in the travel industry has resulted in the company's staff costs rising 9.5 per cent.

As a result, the consolidated operating profit has fallen 37.78 per cent to Rs 4.99 crore in the last quarter and operating profit margin has dropped 951 basis points to 16.08 per cent.

Going forward, the pick up in tourism post the tsunami is expected to help the company grow profit, in the short term.

The market has however, priced in the growth potential with the stock trading at about 20 times forward earnings.

Oil marketing companies

The agreement between PSU oil marketing companies and Reliance Industries, by which Reliance was selling diesel and petrol to the former at a discount of Rs 700 per kilolitre, was not renewed in April 2005.

So now the PSU oil marketing companies will have to buy these products at the import parity price.

That's primarily because PSU refineries are still short of capacity that can produce fuels to meet BSII and BSIII specifications and so for some time will either have to import them or buy these high value-added fuels from Reliance.

While this will no doubt hurt the profits of the marketing companies, speedy modernisation of their refineries should ease the burden.

BPCL's modernisation of its 12mn tonne capacity, should be complete by July while IOC's upgradations should be through sometime in October.

In any case, its subsidiary, Chennai Petro, with a capacity of about 10.5 mn tonne, has the requite upgraded facilities to produce high class fuels.

HPCL will probably be the worst hit. Thus the problem should be restricted to the short term till the PSUs upgrade their facilities.

Perhaps the government should not link the refinery gate price to the import parity price and let marketing companies negotiate with stand alone refiners and extract a better price for their purchases.

Or they could temporarily reduce import duties since retail petrol and diesel prices have not been revised since November 2004.

There is also talk of pure refiners sharing the subsidy burden. In the normal course excess diesel produced in India by Reliance and MRPL, which is exported "" the problem is therefore a purely temporary one.

Meanwhile, however, Reliance which has reportedly set up around 500 petrol pumps across the country, will be slightly better off than its PSU peers.

(With contributions from Amriteshwar Mathur and Shobhana Subramanian)