The Hindu Business Line : Lower treasury income drags down SBI Q1 net

SBI's net profit for the first quarter fell by 35 per cent, mainly due to higher wage costs and lower treasury income. In the corresponding previous period, the bank benefited from a one-time tax refund of Rs 700 crore, which had boosted its bottomline for that period.

The largest bank in the country reported net profit of Rs 798.57 crore for the three months ended June (Rs 1,222.83 crore).

While staff costs rose to Rs 1,924.29 crore (Rs 1,633.57 crore), treasury income dropped to Rs 3,606.48 crore (Rs 4,524.12 crore).

Mr O.P. Bhatt, Chairman, said: "We took a hit of about Rs 696 crore in treasury income due to depreciation in value of Government securities."

Last year, for the Indian Millennium Deposit redemptions, the bank had bought securities at higher coupons, which also led to lower yield from treasury, he added.

A banking analyst said that the figures are more or less in line with expectations.

"The net interest income would have been higher by about 10 per cent if it were not for the one-time income last year. The bank has also increased provision for tax this year. An increase of 17-18 per cent in operating expenses is not much."

Total income was lower at Rs 10,598.75 crore (Rs 10,742 crore), as was net interest at Rs 3,884.09 crore (Rs 4,253.24 crore).

Mr Bhatt said that the bank was targeting deposit growth of 16-17 per cent and credit growth of 20-25 per cent in 2006-07.

"Though credit growth was slack in the first quarter, it will pick up later this year. However, I don't expect it to be as much as last year."

Average yield on advances improved to 8.49 per cent (7.8 per cent).

Retail advances grew by 27.92 per cent and now constitute 26.4 per cent of gross domestic advances. Housing loans formed 52.71 per cent of retail advances.

The share of low-cost savings was 38.31 per cent (42.71 per cent).

Agricultural advances grew to Rs 28,356 crore (Rs 22,232 crore).

On the BSE on Thursday, the SBI scrip closed at Rs 762.85, up 1.19 per cent from the previous close of Rs 753.85.