KOLKATA: The country’s largest bank, State Bank of India (SBI), reported a 32% decline in its fourth-quarter net profit due to higher provisions for bad loans and a sharp increase in wage expenses even as it recorded a 38% jump in net interest income. The bank has proposed a 200% final dividend (Rs 20 per equity share) for 2009-10. It had earlier announced an interim dividend of Rs 10 per share.
Net profit for the quarter ended March 2010 stood at Rs 1,867 crore against Rs 2,742 crore in the year-ago period. SBI will have to make a provision of Rs 1,800 crore towards bad loans during the quarter as it booked fresh slippages worth Rs 674 crore. Fresh slippages for the entire fiscal stood at Rs 11,843 crore. The bank, however, improved its NPA provision coverage to 59.23% from 56.98% a year ago.
The results were below analyst expectations. A Reuters poll of analysts had forecast a 3% rise in net profit to Rs 2,822 crore on net interest income of Rs 6,486 crore. The bank’s share price fell 4% to close at Rs 2,222 on the Bombay Stock Exchange on Friday. Although the quarterly net profit dipped, the bank’s core parameters are doing quite well. It has provided aggressively for non-performing assets (NPAs), which will strengthen fundamentals.Bank to improve performance in next 2 years.The bank is expected to improve its performance in the next two years, said Vaibhav Agrawal, a banking analyst with Angel Broking. SBI’s net interest margin (NIM) improved to 2.66% as on March 2010 from 2.30% a year ago and its chairman OP Bhatt expects NIM to improve further as it focuses on low-cost current and savings bank deposits. Its total income grew to Rs 22,474 crore (Rs 22,061 crore).Mr Bhatt attributed the dip in profit to a variety of reasons, including a liquidity overhang in the bank, additional provisioning towards pension payment and NPAs, and a fall in treasury income. Yet, the country’s largest bank aims to grow its lending by 21-22%. “We do expect a higher growth rate in future as some of our loan products are doing well and our new marketing strategy (has) started paying off,” he said on Friday. The bank has a capital adequacy ratio of 13.39% to leverage for lending growth. “We still have enough capital but will look to raise Rs 15,000-20,000 crore via equity this fiscal without diluting the government’s share from 59%,” Mr Bhatt said. It is discussing the possibility of a rights issue with the government to this end.But, at present, what bothers SBI the most is its idle cash pile of around Rs 40,000 crore. The bank plans to go slow on deposit mobilisation till June-July this year to correct the situation. For the full financial year 2009-10, the bank reported a net profit of Rs 9,166 crore, almost flat compared with Rs 9,121 crore in 2008-09. Total income for the year rose to Rs 85,962 crore (Rs 76,479 crore).The bank has crossed a business mix of Rs 14,45,596 crore, including advances of Rs 6,41,480 crore and deposits of Rs 8,04,116 crore. Its market share in advances improved to 16.28% as on March 31, 2010, from 15.99% a year back. Its share in deposits, however, fell to 16.31% from 17.70% a year ago. SBI’s gross NPA ratio as on March 31 deteriorated to 3.05% from 2.86% because of fresh slippages but net NPA improved marginally to 1.72% (1.79%) as it made higher provision.
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