India’s top lender, State Bank of India, posted a better-than-expected 26 per cent rise in quarterly net profit as access to low cost funds helped cushion tighter margins and nudged its shares up more than 3 per cent. The bank announced a net profit of Rs 1,883.25 crore for the fourth quarter ended March 31, 2008 against Rs 1,493.19 crore in the year-ago period.
Total income rose to Rs 16,393.93 crore for the last quarter from Rs 12,935.11 crore in the same period a year-ago. It also proposed a dividend of 215 per cent at the rate of Rs 21.50 on every share of face value of Rs 10 held.
For the year ended March 31, 2008, the bank announced a net profit of Rs 6,729.12 crore, a 48.18 per cent growth over the year-ago period. The bank had posted a net profit of Rs 4,541.31 crore last year. Total income for 2007-08 rose to Rs 57,645.24 crore from Rs 44,007.59 crore in the previous fiscal.
The state-run bank, which raised $4.1 billion in a rights issue in March, said it expected only a slightly faster pace of loan growth as interest rates at near 5-1/2-year highs rein in runaway inflation and curb demand. “Strong push in retail loans has led to growth . We are aiming at 25 per cent growth in advances in 2008-09 against the Reserve Bank of India’s expectation of a 20 percent growth,” Chairman OP Bhatt said at a news conference, referring to the RBI’s decision.
State Bank, which controls 23 per cent of India's banking business along with its associates, said loans grew 23.4 per cent in the fiscal year to March, slowing from 30 per cent a year ago.
Earnings could come under pressure this year after the central bank last month raised the proportion of deposits that banks must set aside by 75 basis points to a seven-year high of 8.25 per cent. The increase will suck out $405 million from banks and they will earn no interest on the money.