Sbi Likely To Emerge Star Performer

They said SBI's net profit would improve despite a fall in its advances, its main source of income. Bank advances fell by around Rs 2,200 crore ($616 million) in the first four months of 1996-97 due to poor credit demand from industry, they said.

Reduced provision for depreciation in the market value of securities would be the major factor in boosting SBI's bottom line, analysts said.

"SBI had to provide more than Rs eight billion towards depreciation on the market value of its investments in government securities in the first half of 1995-96," said Prasanna Someshwar, banking analyst at W I Carr. "Besides, another Rs 200 crore had to be provided last year towards wage arrears to its employees, consequent upon a wage revision."

 

The absence of these two provisions alone would be enough to boost SBI's profit this year, he said.

Analysts also said SBI was better equipped to withstand any pressure on its spreads.

"The share of fee-based income in its total income has been rising," said Dick Mody, banking analyst at ICICI Securities and Finance Company.

"This will protect it if spreads are squeezed." Other strengths included a network of more than 8,000 branches which enabled it to tap deposits from sources inaccessible to other banks, analysts said.

The bank is also in the process of raising $400 million through an issue of global depositary receipts.

The first roadshow for the issue was held on September 21. This would provide additional cheap funds, analysts said.