SBI Q2 net falls 2.5 per cent on higher tax provisions

SBI, the country's largest commercial bank, has reported second quarter results, which are in line with market expectations. The bank has achieved healthy improvement in most operational and financial ratios, though the bottom line growth was affected because of substantially higher tax provisions and a one-time tax refund booked during the previous year quarter.

For the quarter ended 30 September 2006, SBI has reported a standalone net profit of Rs1,184.49 crore, or Rs22.51 per share, a marginal decline of 2.54 per cent from Rs1,215.16 crore, or Rs23.09 per share, for the pervious year quarter. Total income increased 9.69 per cent to Rs10,811.23 crore from Rs9,856.04 crore a year ago.

Gross interest income went up by 9.53 per cent to Rs9,377.47 crore from Rs8,561.41 crore for the previous year quarter. Interest expenses increased 10.61 per cent to Rs5,478.82 crore from Rs4,953.46 crore. As a result, net interest income increased 8.06 per cent to Rs3,898.65 crore from Rs3,607.95 crore. Net interest margin improved to 3.32 per cent from 3.13 per cent a year ago.

Other income, including fee-based and treasury income, went up 10.75 per cent to Rs1,433.76 crore from Rs1,294.63 crore a year ago. Fee income rose nearly 35 per cent to Rs844.46 crore for the quarter while investment income was substantially lower. Other income rose sharply by 61.5 per cent to Rs425.38 crore.

Sequentially, gross interest income has gone up 6.13 per cent from Rs8,836.15 crore for the previous year quarter. Net interest income is flat on a sequential basis while other income declined 18.66 per cent from Rs1,762.6 crore for the previous quarter.

Operating profits, before provisions, rose 24.69 per cent to Rs2,472.57 crore from Rs1,982.92 crore. Higher growth in operating profits was a result of 4.24 per cent decline in staff related expenses and a modest 3.03 expansion in other operating expenses.

Provisions, including provisions for NPA's, declined 16.66 per cent to Rs681.34 crore from Rs817.54 crore for the previous year quarter. NPA provisions went up to Rs116.11 crore from Rs10.74 crore. Gross NPA's as a percentage of total customer assets declined substantially to 3.57 per cent from 5.26 per cent last year. Net NPA margin improved to 1.67 per cent from 2.27 per cent, but is still higher than nearest competitor ICICI Bank's ratio of 0.9 per cent.

SBI provided Rs606.74 for taxation as against a write-back of Rs49.98 crore for the previous year quarter. The bank had received a large tax refund during the same period of last year.

On a consolidated basis, the SBI group has reported a net profit of Rs1,734.45 crore, or Rs32.95 per share, after minority interest – an increase of 9.03 per cent from Rs1,590.75 crore, or Rs30.22 per share for the previous year quarter. Total group income increased 16.32 per cent to Rs16,255.36 crore from Rs13,974.28 crore a year ago.

Capital adequacy ratio improved to 12.63 per cent as at the end of the quarter from 11.3 per cent a year ago. Tier-I capital adequacy was at 8.74 per cent as compared to 7.95 per cent.

Total advances as at the end of the quarter were Rs2,83,268 crore as against Rs2 31,054 crore a year ago and Rs261,867 crore as at the end of previous quarter. Total deposits increased to Rs3,92,615 crore from Rs3,80,052 crore a year ago and Rs3,80,046 as at the end of previous quarter.

When compared to private sector banks, the percentage of retail advances in total advances is substantially lower. Retail advances were only 25.75 per cent of total advances, as compared to 69 per cent for ICICI Bank, even after a growth of over 26 per cent when compared to the previous year quarter.

SBI has also achieved considerable growth in home loans – one of the biggest growth areas for the banking industry in recent years. During the first half of the current financial year, SBI's total home loan disbursement stood at Rs4800 crore as compared to Rs13,400 crore by ICICI Bank and Rs11,280 crore by HDFC. Housing loans constitute around 52.5 per cent of total retail advances by SBI.