Q2 net up 10.82%; to curb NPAs

SBI net up 17.36% to Rs 1,224 cr in H1

Our Banking Bureau

Mumbai, Oct 30: The State Bank of India (SBI) on Tuesday said that its net profit for the first six months of the current fiscal grew by 17.36 per cent to Rs 1,223.64 crore from Rs 1,042.65 crore during the corresponding period of the last fiscal.

The bank’s net profit for the second quarter of 2001-02 grew by 10.82 per cent to Rs 643.86 crore (Rs 580.95 crore). Operating profit for the period stood at Rs 1,439.36 crore (Rs 1,149.01 crore).
The bank will also take a decision on its prime lending rate (PLR) next week. The PLR is now at 11.5 per cent.

The bank, as part of its business strategy, will focus on curtailing non-performing assets (NPAs), retail banking and increasing non-interest income (fee-based incomes).

Operating profit for the first half grew by 29.81 per cent to Rs 2,902.36 crore (Rs 2,235.77 crore) while total provisioning stood at Rs 1,678.72 crore (Rs 1,193.12 crore). The Financial Express had, on Tuesday, reported that the bank’s net profit growth for the second quarter was expected to be in the region of 10-12 per cent.

Citing reasons for the higher provisioning, SBI chairman Janki Ballabh pointed that this includes a higher Rs 800 crore towards NPAs. The bank also has provided for its equity exposure.

“This includes a proactive step towards building up provisions required for transition to 90 days payment delinquency in fiscal 2003-04 as stipulated by the Reserve Bank of India (RBI)”.

There was also higher provisioning towards income tax at Rs 763.89 crore (Rs 463.73 crore) on account of the higher operating profit. Further, provision towards investment depreciation stood at Rs 116.18 crore (Rs 3.86 crore).

Mr Ballabh pointed out that the higher growth in operating profit was due to the increase in both interest income and other income as well as containment of operating expenses.

The bank’s average cost of deposits stood at 7.2 per cent (7.53 per cent) while its average yield on advances stood at 10 per cent (10.34 per cent) as a result of declining interest rates. The increase in the advance on interests stood at 5.58 per cent.

“The spread (net interest margin) though has come down to 2.8 per cent. It was over 3 per cent earlier,” Mr Ballabh pointed out. It was also pointed out that large corporates were using sub-prime lending route, and nearly Rs 10,000 crore was extended in this manner.
In this context, Mr Ballabh said that a 50 basis points cut in the banks PLR will knock off Rs 400 crore by way of interest income. “I need to have a closer look before I take a decision on the PLR,” Mr Ballabh said, adding, “The first half was a tough one”.

Operating expenses have held largely firm though and stood at Rs 3,423 crore (Rs 3,361.90 crore). This is despite the Rs 177.26 crore for half-year towards payments to provisions for employees on account of its voluntary retirement scheme on a pro-rata basis and deferred revenue expenditure.

Said Mr Ballabh: “Staff cost was minus 1.43 per cent even after the Rs 177.26 crore towards VRS. Due to these savings, operating expenses showed a growth of only 1.84 per cent in the first half.”

On the liabilities side, global deposits of the bank stood at Rs 2,12,818 crore with domestic at Rs 2,07,126 crore, which marks an increase of 17 per cent on a year-on-year basis and 16.77 per cent on annualised basis.

Total advances stood at Rs 1,13,412 crore for the half year. “Advances, which had declined by Rs 4,213 crore during the first quarter of this fiscal, rose by Rs 4,035 crore during the second quarter. The second half will see a credit pick up notably from the agriculture sector and agro-based industries. In October alone, we saw credit grow by Rs 1,500 crore, and if the trend continues, we will see it catch up like the last fiscal,” Mr Ballabh pointed out.

The average level of advances in the first half stood at Rs 1,04,773 crore (Rs 95,967 crore) and was higher by 9.18 per cent. While average resources deployed in treasury went up by 40.96 per cent, the average yield was lower at 10.13 per cent (10.28 per cent) due to declining interest rates. “However, due to the increased volumes in the funds deployed, interest from treasury operations went up by 38.89 per cent,” Mr Ballabh said.

NPAs were lower at 5.58 per cent, down from the 6.03 per cent at end-March 2001. Compromise settlements under the one-time scheme aggregated Rs 1,059 crore involving 3.31 lakh accounts.
Cash recoveries amounted to Rs 633 crore. SBI has now introduced another like scheme for amounts of up to Rs 1 crore. “We are hopeful of bringing down the net NPAs to 5 per cent of net advances by this fiscal-end,” Mr Ballabh said.