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SBI net may drop 50 per cent, say analysts

BS Banking Bureau

Analysts expect the State Bank of India to post around 50 per cent drop in its net profit for fiscal 2001. In the previous financial year, country's largest commercial bank had posted a net profit of Rs 20.51 billion. The bank's board is meeting in Calcutta on June 21 to take into account the audited financial results.

Huge provisioning on account of the voluntary retirement scheme, coupled with a one-time hit on the issue expenses of the India Millennium Deposit are expected to pull down the bank's net profit substantially.

The entire VRS expense (inclusive statutory dues like pension, gratuity and leave travel allowance, etc.) would work out to around Rs 24 billion while provisioning on account of IMD is pegged at Rs 4.60 billion.

"Excluding these extraordinary items (provisionings on account of VRS and IMD), the bank will post a 15-17 per cent jump in its net profit for the fiscal 2001 if one takes into account the actual net profit last year (declared net minus gains on account of writeback of depreciation in investment portfolio)," a senior banking sector analyst said.

Last year, the bank had posted a net profit of Rs 20.51 billion, which included Rs 3.63 billion worth of writeback of provisioning on depreciation in investment portfolio.

In other words, the bank is expected to post a net profit of around Rs 21 billion in 2000-01. However, provisioning on account of VRS and IMD will pull it down substantially.

The bank is expected to make full provisioning (Rs 4.60 billion) on account of IMD expenses while VRS expense will be staggered out over five years.

Out of Rs 24 billion total VRS expense, it may provide for around Rs 9 billion, which will take care of one-fifth of the ex-gratia payment and the full LTA encashment outgo.

"The bank is expected to stagger out the cost of ex-gratia payment as well as pension and gratuity over five years. It is highly unlikely that it will take a hit of Rs 24 billion at one go," pointed out an analyst.

Its gross non-performing assets is expected to come down from 14 per cent to 13 per cent and net NPA from 7.1 per cent to around 6 per cent. "It has made huge recovery of sticky assets which will add to its bottomline," said the analyst.

SBI had posted a net profit of Rs 2.20 billion in the third quarter ended December 31, 2000, down from Rs 4 billion in the corresponding quarter in the previous year.

However, its net profit for the nine-month period ended in December last year was higher at Rs 12.63 billion compared with Rs 11.03 billion in the corresponding period of the previous year.

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