SBI Q4 net dives as costs zoom
State Bank of India on Tuesday reported a plunge in its net profit for the fourth quarter of 2010-11, hit by high provisions for loans with wobbly earnings, while its staff costs also shot up. HT reports. Numbers that strike a difficult chordbusiness Updated: May 17, 2011 23:24 IST
State Bank of India on Tuesday reported a plunge in its net profit for the fourth quarter of 2010-11, hit by high provisions for loans with wobbly earnings, while its staff costs also shot up.
Shares of the country’s largest bank fell by 8% to Rs 2,413 — the biggest intra-day fall for the share in 22 months.
Net profit in the January-March quarter was only Rs 21 crore, down from Rs 1,867 crore in the same quarter of the previous year.
For the full-year 2010-11, the bank, which along with its associates controls about a quarter of India’s bank loans and deposits, reported a net profit of Rs 8,265 crore against Rs 9,166 crore a year ago, down 10%.
The main reason for the increased cost was the amount set apart by the bank to cushion bad loans, which rose during the quarter by 49% to Rs 3,264 crore from a year ago, while operating costs increased 12.5% to Rs 6,794 crore. Increased staff expenses were among the costs.
Net interest income (the difference between interest earned and interest paid) grew by 20% to Rs 8,058 crore during the quarter while non-interest income rose by 7% to Rs 4815 crore.SBI, which made a big gambit to increase market share in home loans through its cheaper "teaser loans" also provided Rs 500 crore as "standard assets provision" during the quarter. Typically, higher risk loans involve higher provisioning by the bank as part of a cushioning mechanism.
The Reserve Bank of India, which sets rules for cushioning, has frowned on teaser schemes and increased provisioning to 2% from the earlier 0.4% for such loans in 2010 to discourage banks from taking undue risks.
The bank’s net interest margin, a measure of efficiency, improved to 3.32% at the end of March 2011 from 2.66% a year earlier.
“We expect the bank’s net interest margin, (a key measure of efficiency) to improve going forward,” said Pratip Chaudhuri, chairman, SBI.