Money & Banking

SBI net drops 46% in Q1 on higher bad loan provisioning

Our Bureau New Delhi | Updated on March 12, 2018


Higher provisioning for non-performing assets (NPAs) and depreciation on investments dented State Bank of India's net profits for the first quarter ended June 30, 2011 to Rs 1,584 crore, down 46 per cent decline over Rs 2,914 crore recorded in same period last year.

The sharp fall was despite a 32-per cent increase in net interest income (NII) at Rs 9,700 crore (Rs 7,304 crore) and an 18 per cent increase in operating profit at Rs 7,242 crore (Rs 6,134 crore). However, the latest quarterly net profit was much higher than the Rs 20.88-crore recorded in the last quarter of fiscal 2010-11.

NIM guidance

The net interest margin (NIM) stood at 3.62 per cent (3.18 per cent). “I had at the beginning of this fiscal given an NIM guidance of 3.5 per cent. We have done better at 3.62 per cent in the first quarter.

Now that we have hiked our base rate to 10 per cent, I am tempted to raise my NIM guidance for the fiscal to 3.6 per cent,” the Chairman, Mr Pratip Chaudhuri, told reporters at a press conference here on Saturday.

Mr Chaudhuri, who assumed charge in April, said that he expects an NII of Rs 10,000 crore and a net profit of Rs 2,500 crore in the second quarter of this fiscal.

SBI's bottomline performance in the first quarter was weighed down by a 60-per cent increase in provisioning for NPAs at Rs 2,782 crore (Rs 1,783 crore).

The Reserve Bank of India's recent move to impose stiffer prudential norms for sub-standard and doubtful assets compounded the problem for SBI as it had to make an additional one-off provision of Rs 995 crore (part of Rs 2,782 crore) for the quarter under review.

Also, an additional provision of Rs 550 crore was made towards the shortfall in countercyclical provisioning buffer which is to be met by September 30, 2011.

Besides provisioning for NPAs, the bank also made a provision of Rs 1,048 crore towards depreciation of investments in government securities and equity portfolio.

Of this Rs 1,048 crore, the provision for depreciation in Government securities stood at Rs 450 crore, diminution in value of SBI Bonds (Government contribution for bank's 2008 rights issue) at Rs 218 crore and equities portfolio at Rs 300 crore.

On a consolidated basis, SBI's net profit for the first quarter stood at Rs 2,770 crore (Rs 3,447 crore) on a total income of Rs 39,126 crore (32,808 crore).

Cost of deposits up

Mr Chaudhuri said the average cost of deposits for the quarter under review was up 39 basis points at 5.66 per cent as on June 2011 from 5.27 per cent as on June 2010 and by 40 basis points from 5.26 per cent as on March 2011.

On the other hand, the yield on advances was up by 113 basis points at 10.43 per cent as on June 2011 from 9.30 per cent as on June 2010 and by 87 basis points from 9.56 per cent as on March 2011.

Published on August 13, 2011

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