State Bank of India’s (SBI) first quarter net profit fell 45.7% year-on-year to Rs 1,584 crore, driven by increase in provisions. This profit was below market expectations. A CNBC-TV18 poll showed net profit at Rs 1,956 crore.However, net interest income or NII rose nearly 33% to Rs 9,699 crore, which was better than estimates. The poll showed NII at Rs 8,529 crore.
Total provisions shot up nearly three-fold or 168% Y-o-Y to Rs 4,157 crore of which provisions for non-performing assets accounted for Rs 2,782 crore compared with Rs 1,733 crore a year back.
In April this year, the Reserve Bank of India increased provisioning norms from 10% to 15% on sub-standard assets while restructured assets too have to be provided at 2% as against 0.25-1% earlier. When a loan account stops repayment for 60 days, it is called sub-standard asset.
India’s largest lender apparently maintained its asset quality at net level. Its net non-performing assets or NPAs improved slightly from 1.63% in the March quarter to 1.61% in the June quarter. However, gross NPAs increased by 24 basis points to 3.52% quarter-on-quarter.
During the quarter, the bank’s capital adequacy ratio stood at 11.6%. Other income fell marginally by 4% Y-o-Y to Rs 3,534 crore.
Provisioning coverage ratio stood at 67.25%. The bank has made an additional provisioning of Rs 550 crore against the shortfall in the countercyclical provisioning buffer, to be covered by September 30, 2011.
As mandated by RBI, profit-making banks are supposed to set aside provisions under the head of countercyclical buffer to achieve a provisioning coverage ratio of 70%. The measure is aimed at protecting a bank's financials at the time of higher loan defaults due to global economic turmoil.
Source: www.moneycontrol.com
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Gaurav Agarwal
Head Dealer
DENIP Consultants Pvt Ltd
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