State Bank of India record 25% profit jump

Buoyed by a 45.4% surge in net interest income, State Bank of India, the country’s largest lender, beat expectations with a first quarter net profit of `2,914 crore — a growth of 25% over last year’s `2,330 crore. The better-than-expected results pushed the bank’s share price up 7% to a new high of `2,797.8. The Sensex which had dropped 155 points after disappointing IIP numbers was yanked out of the red by the SBI stock which rose `180.With the stock closing at `2,784, the bank’s marketcap gained over `11,000 crore to touch `1,76,750 crore, overtaking TCS to become the third-most valuable company in the country.“We expect a credit growth in the range of 21-22% for the current fiscal,” said bank chairman OP Bhatt.The quarterly results came on a day when the Rajya Sabha approved the State Bank of India (Amendment) Bill, paving the way for the government to lower its stake in the bank to 51% from 55%. Finance minister Pranab Mukherjee, however, indicated that the dilution of government stake would not be rushed through. “It is just an enabling provision and it does not mean that it is going to be implemented tomorrow,” he said replying to a debate on the Bill. The consolidated net profit of the group grew by 21.99% to `3,365.26 crore for the quarter, compared to `2,758.53 crore in the first quarter of 2009.SBI’s net interest income grew 45.4% to `7,304 crore at the end of the first quarter, bettering forecasts of `6,595 crore. The bank’s net interest margin was 3.18% as of end-June. “Net interest income is looking very good. Going forward, I think this growth should continue as, in a rising interest rate environment, SBI is best positioned in the sector,” Vaibhav Agrawal, an analyst at Angel Broking, told wire agencies.The state-owned bank reported a growth of 20.74% in its gross advances which went up by `1,14,035 crore. The bank’s market share in advances also increased to 16.55% ending June 30, as against 16.43% during the same period last year. The bank will now take a call on increasing the deposit and lending rates for existing borrowers. “We’ve announced the results, after which we’ll take a call,” said Mr Bhatt, adding, that there is an upward bias on both deposit and lending rates.Non-performing assets, or bad loans, of the bank, however, showed a steep rise with fresh slippages of `4,081 crore. Gross NPAs also increased 35% to `20,825 crore for the period ending June 30 as against `15,318 crore during the same period last fiscal. The bank attributed the growth in NPAs to classification of agriculture debt relief advances which stood at `354 crore. Net non-performing assets (NPAs) stood at 1.7% as against 1.55%, with the bank making provisions for NPAs at `1,733 crore in the quarter as against `1,344 crore in the previous corresponding quarter.“We will review deposit rates and benchmark prime lending rate and a hike would be a minimum of 25 basis points,” said Mr Bhatt. He said that deposit rates have almost bottomed out for the industry and there is definitely an upward bias as far as advances are concerned because of the way the RBI is managing the inflation and liquidity. The bank has a credit pipeline in excess of `50,000 crore.The bank is also looking to raise `20,000 crore from rights issue this fiscal. “Our preferred option is the rights issue. We’ll again initiate discussion with the government on whether they want to participate or not,” said Mr Bhatt, adding if rights issue does not happen, the bank will explore other options such as preferential issue and follow-on offer.