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SBI net up 21 pc to Rs 8.57b; NPAs up to 6.10 pc; 'Tough times ahead for banks, we'll be pro-active' says Verma

State Bank of India has posted a net profit of Rs 8.57 billion for the half year ended September 30, showing an increase of 21.71 per cent over the same period in the previous year.

Operating profit (before provisions and contingencies) was higher by 22.83 per cent at Rs 16.74 billion during the period. SBI made a total provision of Rs 8.16 billion with an additional provision of Rs 910 million towards increase in gratuity ceiling due to the recently enacted Payment of Gratuity (Amendment) Act.

Its net non-performing assets edged up slightly to 6.10 per cent from 6.07 per cent.

While the interest income on advances was up by 12.08 per cent to Rs 87.89 billion, other incomes shot up by 32.56 per cent to Rs 14.69 billion during the half-year mainly due to increased investment activities in treasury operations, leasing and non-fund based operations. The bank's advances to industrial sector continued to be subdued at Rs 622.96 billion, recording a negative growth of 2.9 per cent as against a decline of 5.6 per cent in the corresponding period last year.

SBI chairman M S Verma said banks in general were heading for a tough time ahead particularly in maintaining good assets quality due to slowdown of economy coupled with the growing pressure on interest spreads induced by competition.

''We are acting pro-actively to increase our earnings with higher turnover of business,'' he said.

Verma said that the average resources deployed in treasury operations went up to Rs 754.71 billion during the half year compared to Rs 675.93 billion in the same period last year. The growth of average deposits was up by 18.44 per cent which resulted in an increase in interest payment on deposits by 16.20 per cent in spite of a reduction in the cost of deposits to 7.97 per cent from 8.13 per cent during the period.

While the pick-up in bank credit has shown some encouraging trend in the current month, SBI recorded a credit growth of over two per cent in October as compared to the previous month.

The chairman said that the bank's focus on credit deployment had been changing over a peroid of time with emerging scenario at the market place. On an average, it deploys about 20 per cent of its total credit portfolios in infrastructure sector as terms loans. Its investment in secondary stock market was in the region of Rs 10 billion while in the Unit Trust of India's US-64 scheme was about Rs 1 billion. This portfolio may vary at any point of time depending on yields, he said.

The bank was increasingly active in areas of project financing abroad and in buying selectively Indian papers in overseas markets.

In the half-yearly period, it purchased papers amounting $ 90 million with reasonably credit-risk assurances. The bank supported 20 overseas projects aggregating Rs 29.33 billion in countries like Turkey, Iran, Zimbabwe, Bhutan and Bangladesh.

Bank's export credit however relected a decline of 9.6 per cent at Rs 64.68 billion as on last Friday of September as compared to the level at end-March 1998.

The operating profit of the bank's foreign offices stood at Rs 1.64 billion, an increase of 86 per cent over the six-month period last year. On future business plan, Verma said that the bank was actively considering to venture into insurance business in the near future and predicted that in the next five to six years down the line, SBI's earnings from banking and insurance business would be at the same proportion.

UNI