SBI posts 32 per cent decline in Q4 net profit at Rs1,867 crore

The country's largest bank, State Bank of India (SBI), reported a 32 per cent decline in its fourth-quarter net profit due to higher provisions for

bad loans and a sharp increase in wage expenses even as it recorded a 38 per cent jump in net interest income. The bank has proposed a 200 per cent final dividend (Rs 20 per equity share) for 2009-10. The bank had earlier announced an interim dividend of Rs10 per share.

Net profit for the quarter ended March 2010 was Rs1,867 crore against Rs 2,742 crore in the year-ago period. The bank will have to make a provision of Rs1,800 crore towards bad loans during the quarter due to fresh slippages amounting to Rs674 crore. Fresh slippages for the entire fiscal were at Rs11,843 crore even as its NPA provision coverage rose from 56.98 per cent a year ago to 59.23 per cent.

The results were below the expectations of analysts who had forecast a 3 per cent rise in net profit to Rs2,822 crore on net interest income of Rs6,486 crore. The bank's shares fell 4 per cent to close at Rs2,222 on the Bombay Stock Exchange on Friday. Although the bank's quarterly net profit fell, its core parameters were doing well. The bank has provided aggressively for non-performing assets (NPAs) which will strengthen fundamentals.

According to analysts the bank is expected to improve its performance over the next two years. The bank's net interest margin (NIM) improved to 2.66 per cent as on March 2010 from 2.30 per cent a year ago and its chairman OP Bhatt

Bhatt attributes the dip in profit to a variety of reasons, including a liquidity overhang in the bank, additional provisioning towards pension payment and NPAs, and a treasury income drop. The country's largest lender however, aims to increase its lending by 21-22 per cent.

Bhatt said the bank expected a higher growth rate in future as some of it loan products were doing well and its new marketing strategy (has) started paying off. The bank has a capital adequacy ratio of 13.39 per cent to leverage for lending growth. He added that the bank still had enough capital but would look to raise Rs15,000-20,000 crore via equity this fiscal without dilution of the government's share from 59 per cent.

The possibility of a rights issue with the government is being considered to this end.