Sbi Post Better Q4 Net Because Of Easier Provisioning Rules

With RBI relaxing the deadline to meet new provisioning norms

, State Bank of India is likely to outperform analyst expectations on net profit in the fourth quarter.

Analysts projections of the banks net profits for the quarter ended March 2010 ranged from Rs 2,522 cr to Rs 3,033 cr before RBI relaxed the deadline to meet the new provision coverage ratio (PCR). The board of SBI will meet to finalise its results on May 14 in Kolkata. The bank had earned a net profit of Rs 2,743 cr in the quarter-ended March 2009 and Rs 9,121 cr for full year net in 2008-09. The profit for nine months ending December 2010 was Rs 7,299 cr.

RBI has given SBI time till March 2011 to meet the provision coverage ratio of 70 Percent the amount that a bank is expected to forgo from a loan if it has to write-off that loan account. The banks PCR stood at around 56 Percent for December 2009.

Due to this relaxation, SBI will have to set aside less money as provisions for bad loans is helping them show higher net profit. Most banking analysts has estimated SBIs net profit for the fourth quarter to range between Rs 2,100 cr and Rs 3,000 cr on assumption that it will have to make a provision of Rs 3,000 cr or more in a span of three quarters to meet the PCR norm. RBI had earlier stipulated that all banks should achieve 70 Percent PCR by September 2010.

Senior officials from SBI told ET: We had sought for an extension till September 2011. As of now, we have received an extension to meet PCR till March 2011. SBI bad loans stood at Rs 18,861 cr as on December 2009.

Among other banks, ICICI Bank is given extension till March 2011 to achieve 70 Percent. The private banks PCR was around 60 Percent as on March 2010. In the results preview report, Sharekhan has projected a net profit of Rs 3,033 cr, Edelweiss Research at Rs 2,149 cr, ICICIdirect at 2,842 cr, IDFC SSKI at Rs 2,756 cr and Daiwa Securities at Rs 2,552 cr. However, these reports were released much before RBI governor D Subbarao told analysts (during the annual policy) that the central bank will consider extension of deadline for PCR on a case to case basis. know More About SBI Credit Card

In the preview report on SBI, Edelweiss has said the banks loan book would grow 5 Percent on a quarter-on-quarter basis, net interest income would growth 30 Percent, gross bad loan would remain stable and the provision coverage ratio would increase by 5 Percent.

ICICIdirect has said due to yield coming off from their high of 8 Percent, SBIs mark to market provisions requirement would come down and the bank will record descent trading gains, leading SBI to maintain the overall total income growth of 45 Percent on a Year on Year basis.

by: Dealfor Loans

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