The Telegraph
Since 1st March, 1999
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SBI profit vaults 34%
- Income boost overwhelms bad-loan provisions

Mumbai, Oct. 30: State Bank of India (SBI) today announced a better-than-expected 34.22 per cent rise in second-quarter profit at Rs 835.20 crore against Rs 622.26 crore same time last year.

Earnings were boosted by a sharp increase in other income and a decline in provisions to hedge doubtful debts, analysts said. However, investors were not impressed, and the share lost 1.37 per cent to end at Rs 230 on BSE.

Total income went up to Rs 8,992.39 crore from Rs 8,445.08 crore in the three months to September 2001. Net interest income jumped 4.92 per cent to Rs 2,409.99 crore from Rs 2,297.04 crore, while other income surged 28.11 per cent to Rs 1,132.83 crore from Rs 884.30 crore.

The rise in first-half net profit was 32.97 per cent at Rs 1,598.40 crore against Rs 1,202.04 crore. Net interest income inched up to Rs 4,825.66 crore compared with Rs 4442.84 crore in the first half of 2001-02.

Average domestic advances in the quarter ended September was 11.56 per cent higher at Rs 1,16,890 crore (Rs 1,04,773 crore). Deposits have gone up by Rs 16,187 crore since last reporting Friday of March 2002, up 8.39 per cent.

The bank informed exchanges today that it slashed deposit rates by 50 basis points. The revised interest rates on domestic term and NRE deposits take effect from November 1.

According to analysts who attended the bank’s conference call, the markets fear profits in the months ahead would be dented by the higher provisioning requirements for loans given to Dabhol Power Company. SBI has been saying that it is ready to make provisions on its loans to Dabhol, which now amount to a staggering Rs 1749 crore. However, analysts say the bank has not made any provisions for this loan so far.

Much of the rise in net profit came from higher interest income, other income and control over operating expenses.

SBI said improved performance in credit delivery and non-interest income helped boost the quarterly profit. “Effective management of non-performing assets, leading to improvement in both gross and net NPA ratios and improvement in capital adequacy ratio are the highlights of this quarter’s performance,” the bank said.

The declining interest rates have had an impact on the money made from bank’s treasury operations. Yields went down from 10.29 per cent to 9.70 per cent. However, the interest income on treasury operations increased 7.13 per cent compared with the first half of the previous fiscal due to growth in the volume of funds deployed.

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