Sbi Net Soars 40 Per Cent

The State Bank of India (SBI) yesterday surprised the stockmarket by announcing a hefty 40 per cent hike in net profits for 1997-98 which soared to Rs 1,861.20 crore, up from the previous fiscal's Rs 1329.30 crore.

The bank's board, which met here yesterday to finalise the annual accounts for the year, decided to maintain the dividend at 40 per cent.

Addressing a press conference after declarating the results, SBI chairman M S Verma said the bank had decided to double the size of its balance sheet in four years, by which time its size would be a huge Rs 350,000 crore, up from Rs 180,000 crore now. This will be done taking into account a 7 per cent growth rate of the gross domestic product and 11 per cent industrial growth.

 

Verma said as spreads are bound to come down, the bank would aim at increasing turnover to make up for the lower spreads. "The average PLR has come down from 15.45 per cent to 13.63 per cent," Verma said, adding that spreads had dipped from 4.01 per cent to 3.17 per cent.

One highlight of this year's balance sheet is that SBI has for the first time marked to market its entire investment portfolio, against 71 per cent last year. SBI also gained from the reduction in corporate tax rates, the abolition of surcharge on income tax, and a lowering of interest tax.

Due to a fall in yield-to-maturity (YTM) applicable to various securities, a substantial amount, around Rs 964 crore, was available by way of write-back, after marking 100 per cent of investments to market. Consequently, since it had to pay tax on the amount, the provision towards income tax in 1997-98 went up to Rs 1,001 crore against Rs 925 crore the previous year.

SBI also made a prudential provision against the bank's stan-

dard assets in India (loans and advances) at the rate of 0.25 per cent, over and above the RBI guidelines, in an attempt to meet unforeseen circumstances and to strengthen the balance sheet further. This additional provision worked out to Rs 149 crore. SBI also provided for another Rs 100 crore in respect of the anticipated salary revision of the employees, with a view to phasing out the anticipated expenditure appropriately.

"While the standard assets provisioning is now at 0.25%, we will move to 1 per cent in four years, in line with the best banks in the world", Verma pointed out.

During the year, SBI's capital adequacy ratio improved from 12.17 per cent at end-March 1997 to 14.58 per cent at end-March 1998. The net non-performing assets to net loans of the bank decreased to 6.07 per cent from 7.30 per cent the previous year. Earnings per share (EPS) went up from Rs 26.66 to Rs 35.36 (annualised) and return on equity from 16.67 per cent to 19.37 per cent.

During the year, SBI's global deposits grew 18.4 per cent over the previous year, while domestic deposits at Rs 1,23,549 crore grew 19.1 per cent against 15.1 per cent the previous year. The bank remained market leader, commanding nearly one-fifth of the deposits. Personal banking deposits, which accounted for 56 per cent of the total, grew about 19 per cent over the previous year. The bank's NRI deposits grew 17.8 per cent at Rs 13,894 crore.

Verma said the bank's strategic business unit (SBU) concept had been very successful and the national business unit, with 8,700 branches, was becoming increasingly services oriented and earning increased incomes from services. He said the sale of gold by SBI had generated very healthy response in the first few weeks and would become an important part of the bank's income portfolio, while the housing loans for individuals, which the bank had now been stressing upon, would offer lowest prices and would be the most hassle free scheme for the customer. SBI had already identified 400 branches for housing loans. "We will compete with everyone, including our own SBI Home Finance", Verma said.