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SBI net down 44.78 pc to Rs 10.27 billion, 40 pc pay-out announced

Ankur Bhattacharya in Calcutta

The net profit of State Bank of India, the country's largest public sector bank, has recorded a massive 44.78 per cent slump during 1998-99. It came down to Rs 10.27 billion from Rs 18.61 billion the previous year because of several factors, SBI chairman G G Vaidya announced today.

Addressing the customary news conference after the board meeting here, Vaidya said, "However, on other fronts, the bank had registered impressive growth."

Under the present circumstances, when the country's economy was looking up, the bank was confident of making up the deficit during the next few months and earn a net profit of about Rs 16 billion next fiscal (1999-2000).

Despite the decline in net profit, the bank has recommended a dividend of 40 per cent for the year, subject to the Reserve Bank's approval. The RBI's limit is 25 per cent.

He cited the sluggish economy and a number of internal factors including a provision of Rs 3.19 billion for the Resurgent India Bonds and Rs 3.15 billion towards wage hikes of the bank employees as the main factors behind the sudden slump in net profit. The chairman said since none of these factors were taken into consideration while calculating the gross profit, as expected it went up from Rs 36.55 billion in 1997-98 to Rs 38.37 billion last year.

Giving an overview of the bank's overall performance during the last year, which otherwise recorded a healthy growth in terms of total income, deposits and disbursement of loan, Vaidya said while the total income of SBI had gone up by 19.75 per cent from Rs 186.99 billion in 1997-98 to Rs 223.92 billion last year, the global deposits during the same period grew by 15.2 per cent to Rs 1.51 trillion and the credit portfolio by 10.9 per cent.

However, like the net profit, the bank's operating profit also suffereed a minor jolt as it came down to Rs 34.51 billion last year from Rs 35.04 billion the previous year, the chairman said.

Despite the sudden fall in the net profit and operating profit margins, the directors had recommended an attractive 40 per cent dividend for 1998-99, same for the past two previous years.

About his future plans for further diversification of SBI, which presently controls more than 60 per cent of government financing and accounts, Vaidya said apart from launching the gold banking service very soon, SBI would become a major player in the insurance sector.

At present, preliminary talks were being held at various levels to identify partners for joint ventures in the proposed insurance business, Vaidya said. Regarding the recently launched SBI credit card business, the chairman said he was very happy with the progress and hoped to reach the target of issuing 200,000 cards by this year-end.

To a query about the reported reduction in the bank's forex income after some of the operations were shifted from Calcutta to Bombay last year, Vaidya termed the shift as purely supplementary and said, "At no point of time, the bank intended to set up a substitute unit in Bombay."

About the reduction in the income from forex business from Rs 4.18 billion in 1997-98 to Rs 3.80 billion last year, the chairman said it was mainly due to the cut in interest rates, though the volume had gone up substantially.

Referring to the non-performing assets of the bank which increased from 6.07 per cent to 7.18 per cent in the last year mainly because of slower economic growth, Vaidya said, however, every effort was being made to bring it down to less than five per cent by next year.

This year, the bank's NPA provision went up from Rs 11.51 billion to Rs 14.22 billion, mainly owing to the impact of the continued industrial slowdown, the chairman said.

However, he said, the other income of the bank had recorded a robust growth of 16.47 per cent to Rs 32.84 billion. The share of non-interest income to the total net income was also increased by more than one per cent to 35.14 per cent from 34.28 per cent in 1997-98, he said.

Vaidya said in consonance with the national policy, SBI had accorded top priority to housing finance activitites by liberalising its present scheme. The SBI Housing Finance Scheme was now one of the most attractive and competitive in terms of rates of interest and processing charges recorded a healthy 28 per cent growth during the past one year.

The bank had also initiated steps for further increasing its priority sector lending by another 25 per cent and export credit by nearly eleven per cent, besides improving the international banking service.

A number of representative offices had been opened in Australia, South Africa, Canada and Sri Lanka while the RBI clearance was received for opening another in Bangladesh, Vaidya said.

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