SBH net dips 21% on higher expenses

Posts Rs 380 cr profit, net interest income down 4.69%

State Bank of Hyderabad (SBH) reported a 21 per cent decline in net profit to Rs 379.9 crore for the quarter ended March 31, 2013, under the impact of poor performance amplified by higher expenditure. Net profit for the corresponding quarter last year stood at Rs 481.04 crore.

Net interest income, the difference between the interest earned and the interest paid out on deposits, decreased 4.69 per cent even though the total income for the quarter under review grew 7 per cent to Rs 3,551.25 crore as compared with Rs 3,317.94 crore.

The slippages appears to have hit the bank hard in the fourth quarter as the full year performance ending March, 2013, shows a growth of 16.45 per cent in net interest income that comes on the back of a similar growth in interest income for the year. Net interest margin marginally improved at 3.48 per cent from 3.47 per cent in the previous year. However, net profit for the year decreased 3.7 per cent to Rs 1,250.22 crore as compared with Rs 1,298.27 crore in the previous year.

M Bhagavantha Rao, managing director of SBH, said the bank had made a provisioning of Rs 480 crore towards bad loans at a provision coverage ratio of 65 per cent, higher than the regulatory norms. In addition, the provisioning for staff expenditure keeping in view the imminent wage revision had resulted in a dip in net profit for the year, he said.

On the decline in net interest income during the quarter, he said the bank had to drop interest rates between 1.75 per cent and 4 per cent on the SME sector while the rates on deposits continued to stay high. For the current year, it expects an overall growth in business at 16 per cent with deposits and advances growing at 15 per cent and 18 per cent respectively.

Gross non-performing assets (NPAs) shot up to Rs 3,186 crore (3.46 per cent) as at March, 2013, from Rs 2,007 crore (2.56 per cent) in 2012 and net NPAs rose to Rs 1,449 crore (1.61 crore) from Rs 1,002 crore(1.30 per cent) in the same period. Road projects and other sectors like food processing, textiles and metals, contributed to the overall slippage of Rs 2,800 crore, he said.

'Merger with SBI unlikely'

State Bank of Hyderabad managing director M Bhagavantha Rao said it was unlikely that SBH would become a part of the proposed merger of associate banks with the SBI. When asked about his response to the statement made by SBI chairman Pratip Chaudhuri yesterday on the merger plans, Rao said there was no such move with regard to SBH on the cards as of now. "We are constructing a corporate office in the financial district. Who will do this if the bank is going to be merged with SBI?" he said.

His comment assumes significance in the light of the demand for separate statehood for the Telangana region. SBH and Andhra Bank are the two Hyderabad-based banks. While the former represents the legacy of the erstwhile Hyderabad state, the latter owes its legacy to an entrepreneur-cum-freedom fighter from the coastal Andhra region. Any move to keep SBH out of the proposed merger will have political considerations, either immediate or in the long-term.