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New Delhi: Notwithstanding an increase in its bad debts, the country’s largest lender SBI today reported an over 25 percent growth in net profit to Rs 2,914.20 crore in the first quarter of this fiscal on account of the highest net interest income in three years.

The growth in profit assumes importance since State Bank of India’s net profit fell by 32 percent to Rs 1,867 crore in the previous quarter due to reasons like higher provisioning for non-performing assets (NPAs).

Unveiling the numbers, SBI Chairman O P Bhatt attributed growth in profit to highest net interest income in three years, a decline in the cost of deposits and savings on provision for higher staff salaries.

“Net interest margin rose by 45.35 percent during Q1, FY’11, over Q1, FY 2010, against a growth of 4.30 percent in June, 2009. NII was highest since last three years,” Bhatt said.

He further said the margin expanded due to a cut in interest expenses on deposits and an increase in income. While interest expenses on deposits declined by 11.85 percent through the strategic decision of the bank to shed its high cost bulk deposits, interest income on advances rose by 8.62 percent due to growth in advances.

The solid performance saw shares of SBI surging over 7 percent to Rs 2,790 on the BSE today.

Its operating profit zoomed 66.97 percent in the first quarter. It had declined 7.28 percent last year.

The bank’s advances grew by 20.74 percent to Rs 1.14 lakh crore and deposits by 6.78 percent to Rs 51,734 crore, leading to business growth of 12.62 percent in the quarter to Rs 1.65 lakh crore.

Bhatt said gross non-performing assets of the bank rose to 3.14 percent of its advances in the quarter compared to 2.79 percent last year. It stood at 3.05 percent in the previous quarter.

The net bad debts of the bank also rose to 1.70 percent against 1.55 percent from a year ago, even though it came down from 1.72 percent in the previous quarter.

Bhatt attributed the rise in bad debts to “classification of agri debt relief advances as NPA amounting Rs 354 crore, slippages in restructured assets.”

The RBI has allowed banks to go for restructuring of loans for stressed sectors like realty, textiles, etc, due to the global financial crisis.

“Out of Rs 16,796 crore of restructured assets, Rs 158 crore have slipped into NPA category during the quarter, taking the slippages to Rs 1,774 crore,” Bhatt said.

Even then, the bank has approached RBI for restructuring of loans to the aviation sector, which is facing stress, Bhatt said.

“Aviation sector is on uptick. It required to come out of stress. However, RBI mandate is necessary,” Bhatt said.

SBI has Rs 3,500 crore exposure to the aviation sector, which comprises 0.24 percent of total advances, Bhatt said.

An RBI official explained that aviation sector loans are sought to be so restructured as it would not lead to bad loans. “It would not be through corporate debt restructuring,” he said.

The SBI Chairman said unsecured retail loans like personal advances led to bad debts amounting to Rs 365 crore.

“These NPAs are not in home, auto loans, but in personal loans,” he said.

An SBI official said the bank was able to cut expenses on staff due to Rs 845 crore savings from provisioning for higher salaries to the staff. The bank employees received higher salaries with effect from November, 2007.

Also, the bank paid just Rs 1,100 crore towards gratuity against the provision of Rs 2,200 crore. The bank is talking to employees to stagger this provisioning to five years, since gratuity is not paid to every employee every year, an SBI official explained.

To a question, the SBI Chief said the bank does not have plans for overseas acquisitions at this point of time and is still awaiting the RBI’s nod for an NBFC acquisition.

PTI
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This post was submitted by Virendra Kumar yadav.

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