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.