India's State Bank net plunges

State Bank of India posted an unexpected plunge in net profit, slammed by higher provisions, operating costs and taxes, sending its shares down more than 8 percent. The state-run bank's total provisions in the fourth quarter, including bad loans and investment depreciation, rose 82 percent, while taxes nearly doubled and staff-related expenses such as wages and pension liability also jumped. The bank said that most of the provisions and expenses in the quarter were "one offs".
"We don't see major concern in the long-term structurally on our npa (non performing assets), either in portfolio or provisioning," said the bank's Chief Financial Officer Diwakar Gupta, referring to bad loans. However, shares in the bank, which is valued at $37 billion, fell as much as 8.2 percent to 2,401 rupees before closing down 7.7 percent at 2,414.70. That compared with a roughly 1 percent fall in the broader market and was the biggest daily percentage drop the stock had suffered in nearly two years. Net interest income rose nearly 20 percent to 80.58 billion rupees, as gross advances increased 20.3 percent to 7.7 trillion rupees ($170 billion) as on end-March. Deposits increased 16 percent to 9.3 trillion rupees.
A Reuters poll of brokerages had forecast a profit of 30.33 billion rupees on net interest income of 91.09 billion rupees. State Bank's total provisions in the quarter rose 82 percent from a year ago to 60.59 billion rupees, while operating costs increased 12.6 percent to 67.94 billion rupees. Net interest margin, a key measure of efficiency, rose to 3.32 percent at end March from 2.66 percent a year ago as the bank increased its low-cost deposit base.
Net non-performing assets rose to 123.5 billion rupees at March-end from 108.7 billion a year ago. The bank withdrew a special home loan scheme in May, in response to concerns raised by the central bank. State Bank had launched the special loan scheme, following the global economic downturn, to boost loan demand. But many analysts had expressed concern about it creating more bad loans for the bank.