SBI profit flat at Rs 2,501 cr on bad loan provisioning
State Bank of India , the nation’s biggest lender, said quarterly net profit remained almost static belying expectations as it set aside more funds for bad loans and lost money trading bonds and currencies.
The bank said net profit for the quarter ended September 30, 2010, was Rs 2,501.37 crore, up from Rs 2,490.04 crore a year earlier.
The poor show was due to meeting higher provisioning norms.
Both the treasury and corporate banking faired poorly. Pre-tax treasury loss stood at Rs 410 crore as against a profit of Rs 1,341 crore a year earlier. Pre-tax earnings from corporate banking fell 12% to Rs 1,241 crore from Rs 1,408 crore a year earlier.
The lender increased provisions for non-performing assets by 96% to Rs 2,160 crore expanding the provision ratio to 62.8%, from 60.7.
The Reserve Bank of India, in October 2009, said it would require banks to increase the minimum provision ratio to 70% from 10%.
Gross bad loans rose 34% to Rs 23,200 crore accentuated by `854 crore bad loans of its associate, State Bank of Indore that merged with it.
“Most state-run banks reported accelerated growth in non-performing assets this quarter,” Sandeep Jain, an analyst at IDBI Capital Markets told Bloomberg.
“SBI’s doubled provisioning could indicate a similar spike,” he said. Retail banking was a saving grace for the bank that will soon be under pressure as the central bank is forcing banks to get rid of ‘teaser rate’ loans, especially in mortgages.
Loans to individuals led to a pre-tax profit of Rs 3,470 crore, that doubled from Rs 1,702 crore a year earlier. With RBI raising the rates for the sixth time this year, demand for loans may fall hurting the banks’ earnings further.
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