SBI's fourth quarter results are well below expectations as the bank faced considerable pressure on net interest margins. The damage was limited through one-time gains of nearly Rs1,100 crore under different heads, from the redemption of India Millennium Deposits (IMD).
For the fourth quarter ended 31 March 2006, stand alone net profits have declined 19.87 per cent to Rs853.29 crore, or Rs16.21 per share, from Rs1,064.88 crore, or Rs20.23 per share, for the previous year quarter. Total income increased 8.2 per cent to Rs11,186.1 crore from Rs10,338.16 crore.
The pressure of rising interest costs is evident in fourth quarter numbers. Interest expended rose 5.49 per cent as compared to the previous year quarter even as total interest earned declined by 1.6 per cent. As a result, net interest earned dropped substantially by 10.03 per cent during the quarter.
On redemption of IMD's, an amount of Rs563.52 crore paid to RBI during the years 2001 and 2002 for maintenance of exchange value was received back. This amount was credited to the interest expended account during the quarter. Adjusted for this amount, the decline in net interest earned for the quarter would be more than 24 per cent.
Income from treasury operations, exchange gains and other income rose 58.34 per cent to Rs2,677.02 crore from Rs1,690.65 crore for the previous year quarter. The substantial jump in other income was largely due to an exchange gain of Rs531.54 crore on redemption of IMD's.
Operating expenses for the quarter increased 11.15 per cent as compared to previous year quarter while staff costs increased by a much lower 4.04 per cent. Better control over operating and staff costs and the jump in other income helped SBI to increase operating profits by 12.08 per cent.
Provisions for the quarter declined 19.92 per cent as net non-performing assets (NPA) came down to less than 2 per cent from over 2.5 per cent during the previous year quarter end. Provision for taxation jumped nearly 5 times to Rs1,084.74 crore from Rs187.03 crore.
For the full year 2005-06, stand alone net profit of SBI increased 2.37 per cent to Rs4,406.67 crore, or Rs83.73 per share, from Rs4,304.52 crore, or Rs81.79 per share. Full year income increased 9.19 per cent to Rs43,183.62 crore from Rs39,547.91 crore.
Full year consolidated profits of the SBI group increased 12 per cent to Rs5,529.92 crore from Rs5,463.93 crore for the previous year. Consolidated income increased 11.55 per cent to Rs60,834.92 crore from Rs54,535.7 crore.