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Higher provisioning hits SBI's fourth quarter net

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OPTIMISTIC: State Bank of India Chairman O. P. Bhatt along with other senior officials addressing the media in Kolkata on Friday.
OPTIMISTIC: State Bank of India Chairman O. P. Bhatt along with other senior officials addressing the media in Kolkata on Friday.

Special Correspondent

The bank plans to raise Rs. 20,000 cr through rights issue

Pays a dividend of Rs. 30 per share

Credit growth set to rise by 22 %

KOLKATA: Even as it posted a drop in its fourth quarter profit on higher provisioning, State Bank of India ended 2009-10 with a net profit of Rs. 9,166 crore against Rs. 9,121 crore in 2008-09.

Chairman O. P. Bhatt said here at a press conference that the fourth quarter net profit had declined from Rs. 2,742 crore to Rs. 1,867 crore, due to a variety of reasons, including a Rs. 547 crore provisioning on account of pay-revision arrears, a Rs. 1,600-crore provisioning on account of non-performing assets and a Rs. 40,000-crore liquidity overhang.

The SBI board declared a dividend of Rs. 30 per share on Friday based on the results which showed a 13.4 per cent growth in net interest income and a 26.5 per cent increase in fee-based income year-on-year.

In 2008-09, it paid a dividend of Rs. 29 per share. Other income is up by 17.9 per cent despite a Rs. 451-crore decline in profit on sale of investments.

Retail bond planned

The bank ended 2009-10 with a total business growth of Rs. 1,54,983 crore comprising a deposit growth of Rs. 62,043 crore and advances growth of Rs. 92,940 crore. Its market share in total deposits showed a decline, while that of low-cost demand deposits was up.

In retail loans, the bank retained its top slot, driven by home, auto and education loans. To a question on fund-raising plans, Mr. Bhatt said that in addition to talks with the government on a probable rights issue for raising between Rs. 15,000 crore and Rs. 20,000 crore, SBI was planning to launch a retail bond by September.

“We are looking to raise about Rs. 200 crore mainly for deepening the market and having a mechanism of having capital on the tap.”

He said that this would perhaps be the first instrument of its kind in the market and it had already been approved by the board. “We are now talking to merchant bankers.” He said that the objective regarding the rights issue was to do it while keeping intact the government's 59 per cent holding in the bank.

Outlook

The chairman said that although higher provisioning mainly due to increases in NPA had impacted profit in the last quarter, the bank was in a position to raise resources and partner big business. “In all business categories it will do better than industry,” he said adding that while credit growth was set to increase by about 22 per cent, deposit growth would grow from the second quarter onwards with a projected rate of about 16 cent. “The only blip is the changes in the interest calculation.”

Mr. Bhatt said that SBI Cards had reduced its losses and SBI Life was awaiting Insurance Regulatory and Development Authority (IRDA) guidelines for launching an IPO aimed mainly at a price discovery that will add to SBI's share-value.


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