Mumbai, Oct. 27: The State Bank of India has reported better-than-expected numbers for the second quarter ended September 30. The net profit of the bank grew 36 per cent to Rs 1,611.42 crore from Rs 1,184.49 crore in the year-ago period. Analysts had estimated the net profit to be around Rs 1,400 crore during the period.

However, the result was not without disappointments. The net interest margin declined to around 2.8 per cent from 3.3 per cent. Net interest margin is the difference between the average interest generated by the bank on loans and that paid on deposits.

Cost of deposits increased to 5.48 per cent from 4.51 per cent last year because of higher mobilisation of term deposits. The ratio of low-cost current and savings account deposits fell to 39.45 per cent.

Despite these setbacks, the SBI said it fared well in its core operations even as non-interest income increased. Net interest income of the bank was Rs 3,762.9 crore during the period.

Gross advances grew 26.21 per cent to Rs 36,3591 crore from Rs 28,8078 crore in the corresponding period a year ago.

Gross non-performing assets (NPA) ratio declined to 2.92 per cent from 3.38 per cent, while net NPA ratio dropped to 1.63 per cent. However, the bank provided Rs 489.84 crore as loan-loss provision in the first half of the year against Rs 287.66 crore last year.

The bank’s average yield on advances improved to 9.84 per cent in September 2007 from 8.55 per cent last year. Interest income on advances went up by around 44 per cent in the first half of the year because of the volume growth in advances and improvement in yield.

SBI chairman .P. Bhatt said the margins were under pressure because of high deposit rates. He said though the bank was reducing the focus on low-yielding advances, deposits had overtaken asset growth during the period.

The SBI was awaiting the decision of the ministry of finance on its capital raising plans, Bhatt added.

IndusInd bottomline

IndusInd Bank has posted a 30 per cent rise in net profit at Rs 22.34 crore for the quarter ended September 30 against Rs 17.18 crore for the same period last year.

The bank’s total income grew 25.36 per cent to Rs 525.47 crore compared with Rs 419.17 crore in the year-ago period.

“Our focus has been on increasing our low-cost deposits and pushing up our net interest margin. Our net interest margin has been improving because of a combination of factors, and our cost of deposits decreased because of softening of interest rates,” said Bhaskar Ghose, managing director and CEO of IndusInd Bank said.