The country?s largest bank, State Bank of India, registered a 32% drop in net profit for the last quarter of fiscal 2009-10 at Rs 1,866.60 crore, against Rs 2,742 crore in the corresponding quarter of the previous fiscal, due to a rise in employee costs, fall in other income and higher provisioning for non-performing assets. For the whole fiscal, net profit was Rs 9,166 crore against Rs 9,121 crore in FY09, a marginal 0.4% increase. The results disappointed the markets, with the SBI scrip falling 4% to close at Rs 2,222.65, on a day when the Sensex fell 1.57%.
Explaining the reasons for the sharp dip in the fourth quarter, the bank said operating expenses grew 40.93% mainly due to increase in staff expenses and additional provisioning for pension; other income was down 4.44% due to a 72% decline in profit on sale of investments.
Operating expenses were 29.84% higher in FY10, driven by five key costs: during Q4FY09, when nearly 27,000 new employees came on board, the full impact of costs was felt in FY10; Rs 627 crore went into wage revision arrears; Rs 1,998 crore was spent towards additional contribution for pension; an additional Rs 59 crore was spent on financial inclusion; and Rs 347 crore was spent to open 1,049 branches and installing 7,788 new ATMs during the year. Loan loss provision during FY10 stood at Rs 5,147 crore against Rs 2,474 crore in FY09, an increase of 108%. For the quarter, non-performing assets provisioning stood at Rs 1,600 crore.
But net interest income of the bank in FY10 increased 13.41% over FY09, while cumulative net interest margins, which had declined from 2.93% in FY09 to 2.30% in June 2009 improved sequentially to 2.43% in September 2009, 2.56% in December 2009 and 2.66% in March 2010. Income from resource operations rose 13.40% as yields were low during FY10 due to a liquidity overhang.
At the post-results press conference, SBI chairman OP Bhatt said the bank had Rs 40,000 crore in extra liquidity at the end of April and that it had cost the bank Rs 273 crore to carry it. However, Bhatt said that going forward, he envisioned a higher growth rate for the bank, riding on several factors. The retail loans segment is growing fast, with education, home and auto loans being the key drivers. ?We have put in an NPA management system in place and the results are bearing fruit. Also, we have a pipeline of projects worth Rs 25,000 crore and we have sanctions to do business of another Rs 20,000 crore. The ability to raise resources is much better,? said Bhatt.
Bhatt said incremental NPAs are going down ? ?the slippage in Q2 of FY10 was Rs 2,000 crore, in Q3 it came down to Rs 1,400 crore and in Q4 to Rs 674 crore.? Vaibhav Agarwal, VP, research, banking, Angel Broking, said the asset quality pressure for the bank was coming mainly from corporate and SME accounts.
The bank saw a total business of Rs 1,54,983 crore at the end of March 2010 with deposits at Rs 62,043 crore and advances at Rs 92,940 crore. Savings bank desposits grew at an average of Rs 4,897 crore per month during FY10, while total CASA (current and savings accounts) growth during the year was Rs 73,168 crore. Bhatt said due to the huge liquidity overhang, the bank would ?grow down our deposits? till June, but expected retail deposits to go up in Q2 and Q3. The bank had brought down its average cost of deposits by 50 bps to 5.80% as on March 31, from 6.30% as on March 09.
He said he was bullish on credit growth and expected it to be at 21-22% for FY11. Gross advances for the year was up by Rs 92,940 crore, a growth of 16.94% from Rs 5,48,540 crore in March 09 to Rs 6,41,480 crore in March 10.
SBI, which is continuing with its teaser rates till June 30, saw its home loan portfolio growing by 31.69% year-on-year from a level of Rs 54,063 crore in March 09 to Rs 71,193 crore in March 10. Almost 95% of its customers in rural, semi-urban and urban areas are first-time buyers, Bhatt said.
Other bank stocks were impacted as well, with the BSE Bankex falling 1.85%. All 14 Bankex constituents declined, with SBI falling the most (-4%), followed by Canara Bank (-2.56%), PNB (-2.14%) and Kotak Mahindra Bank (-2.13%). Sensex heavyweight SBI pulled the index down by 34.56 points, while the banking sector on an overall basis contributed to half of Sensex?s 271-points fall.
?Higher-than-anticipated employee expenditure and NPA provisioning were the key reasons that contributed to the drag on SBI?s profitability? said an Ambit research report. While analysts expect that the sharp rise in provisioning could be to achieve the RBI mandated 70% provision coverage ratio for bad loans before September, the concern is about the coverage ratio. ?NPA provisioning, although high, is just about keeping pace with incremental slippages,? mentions the Ambit report. So, while gross NPAs inched up by 4% during the quarter (sequentially), net NPAs were lower by an identical margin on a sequential basis. As a result, the bank?s provisioning coverage ratio remains at less than 45%. Analysts said they were comfortable with 50% provisional figures.
?(With inputs from fe Bureau in Mumbai)
