State Bank of India, the country's largest commercial bank, has reported first quarter results, which confirm rising margin pressures for domestic banks. Though credit growth remains robust, net interest margins are seeing a declining trend, which may persist for some more time.
For the quarter ended June 2006, SBI's net profits fell 34.7 per cent to Rs798.57 crore from Rs1,222.83 crore for the previous year quarter. Total income declined marginally by 1.34 per cent to Rs10,598.75 crore from Rs10,742.85 crore for the prior year quarter.
The bank had booked a one-time income of nearly Rs700 crore during the previous year quarter as interest on income tax refunds. Adjusted for this amount, net profits have increased by 20.31 per cent.
On a sequential basis, net profits fell 6.41 per cent from Rs853.3 crore reported for Q4 2005-06 while total revenues were lower by 5.25 per cent from Rs11,186.11 crore.
Total interest income declined 3.6 per cent over the previous year quarter while interest expenses increased marginally by 0.76 per cent. Interest on advances went up by 37.92 per cent while other interest income, which included interest on tax refunds during the previous year quarter, declined considerably.
Net interest income fell by 8.68 per cent over the previous year quarter. Net interest margins declined to 3.77 per cent from 3.37 per cent during the previous year quarter.
When compared to the last quarter of 2005-06, total interest income has increased 3.84 per cent while interest expenses declines very marginally by 0.05 per cent. Net interest income increased 9.27 per cent sequentially.
Non-interest income or fee income and other income increased 11.8 per cent over the previous year quarter but declined substantially by 34.16 per cent sequentially, mostly because of a steep fall in investment income.
Operating profits declined 17.53 per cent over the previous year quarter and 13.45 per cent sequentially. Adjusted for one-time income, operating profits have increased 3.99 per cent over the previous year quarter.
An increase of 17.8 per cent in staff costs over the previous year quarter affected operating profits. Establishment expenses like rent and lighting increased 10.26 per cent and other operating expenses went up by 32.55 per cent on a year-on-year basis.
Sequentially, staff costs remained flat while establishment and other operating expenses declined 12.59 per cent and 25.46 per cent respectively. Depreciation charges went up considerably by 42.52 per cent on a sequential basis.
A substantial 67.95 per cent jump in provision for taxes over the previous year quarter and 30.31 per cent sequentially, affected the bottom line. Total provisions - including tax provisions - declined 8.06 per cent over the previous year and 15.93 per cent sequentially.
Total deposits as at the end of the quarter was Rs3.78 lakh crore as compared to Rs3.76 lakh crore as at the end of previous year quarter. Total advances as at the end of the quarter increased to Rs2.62 lakh crore from Rs2.13 lakh crore.
Capital adequacy ratio as at the end of the quarter stood at 11.97 per cent as compared to 11.63 per cent as at the end of previous year quarter. Gross NPA's as a percentage of total assets were steady at 3.88 per cent while net NPA's declined to 1.69 per cent from 1.87 per cent.