Our Bureau

Bangalore, July 26

State Bank of Mysore has reported a nine per cent rise in net profit for the first quarter of the financial year 2006-07 at Rs 50.89 crore.

The Managing Director, Mr Y. Vijayanand, told presspersons here on Wednesday, "This was a difficult year for banks."

During Q1, the operating profits were Rs 109 crore, down from Rs 131.58 crore in the corresponding period of the last financial year. The drop, he said, was mainly on account of the contraction in treasury profits.

Gross income of the bank was Rs 472.45 crore, up from Rs 415.78 crore. Interest income was Rs 399.25 crore (Rs 313.34 crore). Interest on advances during the period rose from Rs 192.86 crore to Rs 268.08 crore. However, other income that also included treasury income dropped to Rs 73 crore from Rs 102 crore.

Also, gross expenditure rose from Rs 284.19 crore to Rs 363.39 crore. The rise was led by an increase in interest expenditurefrom Rs 173.22 crore to Rs 230.59 crore.

Additional provisions

During the first quarter, the bank increased its securities under the held-to-maturity category to 65 per cent. This resulted in an additional provision of Rs 20.19 crore. Under the available-for-sale category or marked-to-market, the provisions amounted to Rs 11.62 crore. In addition, the bank holds additional provision of Rs 119.57 crore as floating provision.

Written-off accounts recovery

What also helped the bank's bottomline in the first quarter were the large recoveries ofwritten-off accounts. This allowed the bank to book the entire amount as income. It had made cash recoveries of Rs 12 crore during the year. But SBM hoped to recover another Rs 21 crore from the State Government on guarantees provided to the Karnataka Government owned public sector unit, NGEF Ltd that has gone into liquidation.Mr Vijayanand said that the bank's capital restructuring was delayed, since the amendments to the SBI Act were yet to be cleared by Parliament. Its capital requirement over the next three years is estimated at Rs 650 crore. At least Rs 325 crore would be in the form of Tier-I capital during the period. However, he said that even at the current level of credit offtake, the bank would still end up with a capital-to-risk weighted asset ratio of 10.75 per cent from the current level of 11.39 per cent. During the current year, the bank plans to raise at least Rs 125 crore in the form of Tier-II capital.

(This article was published in the Business Line print edition dated July 27, 2006)
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