SBI – Q1 consolidated earnings up 68%

Recently, we covered SBI in one of our articles which can be accessed HERE. SBI, India’s largest bank has come out with its June quarter results. The standalone earnings for the quarter were reported to be around 2230 Crore, an increase of 36% from the corresponding period of the previous year. However, the consolidated earnings were higher at 2758 Crore, an increase of around 68% from around 1640 Crore of the FY 09 June quarter. Clearly most of the brokerages were not expecting such high numbers from SBI and the results were really beyond what they were estimating.

The good results were mainly on back of the drop in the government debt paper yields since it boosted the value of the bond holdings. SBI is already contributing for more than 20% of India’s banking assets and it continues to increase its market share in loans and deposits. Bhatt has been aggressive in recruiting more talents, reducing the rates, opening more branches mainly in rural areas and thereby increasing his new customers and hence more deposits. He was doing all of these in the last 12 months period when most of the other banks were not sure what to do.

However, it should be noted that all banks have been coming out with better than expected results mainly on back of the treasury incomes and trading gains. Most of the banks had reduced their lending exposure and preferred to park their money with RBI and government bonds. The surplus or the total amount invested was so huge and that has been yielding the better than expected results.

Trading in bonds and currencies resulted in a pretax profit for treasury operations of around 4000 crore compared with a loss of around 800 crore a year earlier. Net interest income or the difference between the income earned on loans by the bank and the interest paid on deposits increase by around 4.3% to about 5000 Crore. Bad loans increased by around 40% to about 15,300 from around 10,800 crore a year earlier.

The bank is currently expanding its network which stands at more than 11,800 branches in India. The bank has been reducing costs by reducing the interest rates paid on deposits. The bank has collected huge amount of deposits last year – almost to the tune of around 1000 crore a day during the last few months.


To contact the equity analyst on this story: Arun Gopalan in Chennai at Arun@hbjcapital.com