State Bank of India has reported a decline in its net profit in Quarter 1

By | June 19, 2011

A recent press report said that the focus of SBIs on core business is not enough to shore up the profits in Quarter 1. The report stated that even though the core business is improving significantly, higher investment depreciation, low income from sale of investments, providing for improving the provision-coverage, incremental slippages and provisioning for standard assets are the reasons for a slip in the Bank’s profitability.

The report further stated that the Investment depreciation provision was Rs.1048 crore which was only Rs.298 crore in June 2010 Quarter which coupled with the continuing trend of a rise in Non Performing Assets hence reducing the profit. Agriculture, Small and medium enterprises and the restructured accounts were those which contributed to the rise in non performing assets.

However, when most of the PSUs faced a contraction in net interest margins, SBI showed an improvement from March 2011 quarter despite the rise of savings bank deposit rates. The main reasons behind the rise in margins were lending rates hike, deposits getting re-priced during the June quarter.

According to the report, SBI continued to maintain its CASA ratio at around 48 per cent and hiked its base rate by one percentage point in June quarter and subsequently raised another 75 basis points. SBI also went slow on the deposit hikes which also put less pressure on net interest margins. It has increased its home loan and other loan rates which have caused the new borrowers hesitate to take up a loan.

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About Pradeep Yuvaraj

Pradeep Yuvaraj is a Co-Founder and Director at Finerva Financial Solutions Private Limited, a financial education company focused on personal finance education. He has penned over 250 articles relating to Personal Finance and clocked over 500 hours of educating individuals on managing personal finance. He is a serial entrepreneur and has been associated with 7 Start-ups. His entrepreneurial experience spans industries as varied as Education, Gas Engineering, Automobile Design, Software development and more recently a Pure play presentation design company. Prior to turning entrepreneur in 2005, he has worked for 3 of the top ten companies of the world - Shell, ExxonMobil and Total SA. This experience included handling Branch Operations, Channel Sales and Business Development across 5 states over a period of 8 years. He holds an MBA from Symbiosis and an Electronics Engineering Degree from the University of Pune.

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