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New norms spur SBI profits

NetScribes/Radha Ganesan

The new norms on valuation of government securities stipulated by the country's central bank has helped State Bank of India post a 71 per cent net profit growth in the second quarter of the current fiscal.

SBI has taken advantage of the new norm which allows banks to provide up to 25 per cent of their investment portfolio as 'Held for Maturity', and has cut back on depreciation charges. This has allowed a Rs 0.7-billion write-back of depreciation charges incurred on first-quarter investments. Otherwise, the net profit would have grown by 51 per cent to Rs 5.36 billion.

"The results were beyond our expectations, and were possible mainly due to lower provisions," said Dhiraj Sachdev, an analyst at HDFC Bank. SBI's provision for contingencies (possible non-performing assets) was also down by 11.35 per cent to Rs 3.05 billion in the latest quarter.

However, the country's largest bank disappointed on other counts. Its topline growth of 14.53 per cent to Rs 71.09 billion has been put below the industry average by analysts.

The non-operational income of Rs 9.05 billion (a growth of 15.84 per cent) was buoyed mainly by Rs 1.34 billion booked as profit from sale of investments.

"The presence of too many private players has affected the bank's fee-based income," Sachdev said.

"The forex income has gone down by 18 per cent, though it should have been good this quarter," said Sheshadri Sen of SG Asia.

Over the first half-year, the net profit rose by 52 per cent to Rs 10.67 billion, on a 15.41 per cent growth in interest income to Rs 121.27 billion.

SBI chairman GG Vaidya put the better performance in the light of "efficient treasury management, decrease in depreciation costs, and better business volumes." He projected Rs 24-billion net profit on the back of a 16 per cent increase in credit offtake in the year to March 31, 2001.

"Rs 24 billion is an achievable target, as higher credit offtake is expected in the second half," Sachdev said.

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