SBI net spurts 37% on income growth

THE country's largest lender, State Bank of India has posted a net profit of Rs 2,478 crore for the quarter ended December 31, 2008, an increase of 37% over the net profit of Rs 1,809 crore in the corresponding period last year. The increase has been on account of a sharp rise in lending margins.
    Analysts expected a big jump in profits and felt gains would follow windfall gains from treasury. As a group, SBI's profit growth was even better with a consolidated net profit of Rs 3,607 crore, up 51% from the corresponding quarter last year. Operating profit for the bank was up 22.5% at Rs 4,482 crore against Rs 3,660 crore.
    "Contrary to market expectation that profits would come from treasury, SBI has reported strong growth in core income (net interest income and fee income). This indicates that the bank was not dependent on treasury income for growth this quarter," Hemindra Hazari, head of equity research at Karvy Stock Broking said. The main driver of the growth in profits for the third quarter was the 35% jump in net income interest (NII). Gainer among Indian banks
AGAINST Rs 4,256 crore last year, SBI's interest margins improved to Rs 5,758 crore in the quarter ended December '08. On the other hand, treasury gains were flat at Rs 674 crore against 644 crore in the corresponding period last year.
    A senior official said the bank would have managed to report a 76% increase in net profit for the quarter had it not made a Rs 750 croreprovision towards meeting liabilities for employees superannuation benefits as prescribed under AS 15.
    Banks were allowed to amortise provisioning for AS 15 over a five-year period. SBI has emerged a gainer among Indian banks following the global financial crisis in October.
    The international credit freeze pushed up demand for loans, which rose 28.5% to Rs 5,10,279 crore. Tight liquidity helped the bank improve its net interest margins to 3.15% from 3.01%.
    Lastly, the flight to safety and high interest rates enabled the bank grow its deposits by a record 36% to 692,921 crore.
    The bank has witnessed some pressure on bad loans. SBI made a provision of Rs 515 crore for bad loans against Rs 444 crore last year. Gross NPA rose to Rs 13,314 crore from Rs 11,182 crore while net NPA rose to 6,864 crore from Rs 5,610 crore.
    However, as a percentage to total advances, gross NPAs fell to 2.61% from 2.82% while net NPAs stood at 1.36% against 1.44%. Capital adequacy stood at 13.72% under Basel II norms. Bank officials said the write-back of excess depreciation provisions on government securities was to the tune of Rs 513 crore.
    Even after write back SBI has made a net provision of Rs 198 crore. SBI's bond portfolio would have significant hidden profits because of the rise in bond prices. While banks have to make provisions for a fall in market value of government bonds they are not allowed to book profits for any gain. But in case of a rise in market value they can write back excess provisions made earlier.