SBI net rises 28%

State Bank of India (SBI), the country’s largest lender, today said that its consolidated net profit rose 28.29 per cent to Rs 3,133.16 crore for the quarter-ended September 30 from Rs 2,458.04 crore in the same quarter of the previous year.

The increase was mainly on account of a 79 per cent rise in other income to Rs 8,083.74 crore. The consolidated income of the bank rose 22 per cent to Rs 33,101.65 crore during the quarter.

Standalone, SBI’s net profit for the quarter went up 10.19 per cent to Rs 2,490 crore, the slowest in four quarters. Income went up 18.94 per cent to Rs 21,301 crore. The bank’s total expenses increased 20 per cent to Rs 16,466 crore during the quarter; its operating profit went up 15.3 per cent to Rs 4,835 crore.

SBI Chairman O P Bhatt attributed lower profit growth to rising overhead costs due to branch expansion and higher provisions for pension and wages. The provision for salary payments has been raised because of the wage negotiations that are underway with the unions.

The bank had earlier assumed a 13.5 per cent increase in wages. But, in recent weeks, all state-owned banks have agreed to a 17.5 per cent rise. This has forced SBI to rework its provisions. In addition, the bank made an additional provision of Rs 200 crore towards its pension liability.

What affected the bank’s performance was a meager 2.81 per cent rise in net interest income as credit growth dropped to its lowest level in 12 years.

While industry-wide growth was 10.8 per cent for the year up to October 9, SBI’s advances increased 16.4 per cent at the end of September. In addition, hardening yields led to a subdued treasury performance during the quarter.

The good news came from other income, fees and commissions, which grew 58 per cent to Rs 2,103 crore. As a result, the bank’s other income went up by over 50 per cent to Rs 3,525 crore during the quarter.

The bank’s attempts to lower the cost of deposits, through a repeated reduction in rates and repayment of high-cost bulk deposits, helped it increase the net interest margin (NIM) to 2.43 per cent in the second quarter, compared to 2.3 per cent during the previous quarter (April to June 2009).

The bank’s asset quality worsened as gross non-performing assets (NPAs) increased 46.68 per cent to Rs 17,375.76 crore at the end of September 2009 from Rs 11,846.19 crore a year ago. The increase in retail NPAs was mainly in housing (Rs 588 crore) followed by educational loans (Rs 88 crore). Provision coverage ratio of the bank fell to 42.87 per cent at the end of September from 45.15 per cent three months ago.