SBI Margins Improve but Q1 net falls

SBI reported a net interest margin of 3.37 percent comparede with 3.14 percent a year earlier, adjusting for one-time income. The margins improved because of the decline in the cost of deposits to 4.47 from 4.82 a year earlier and its average yield on loans rose to 8.49 percent from 7.80 percent. The Net interest income fell 8.7 percent to Rs. 38.84 bill from 42.53 bill. This is mainly due to lower income from treasury operations. The central bank is aiming to keep inflation in a 5 to 5.5 percent range and raised the short-term interest rates by 25 basis points earlier this week to 6 percent.

The central bank is projecting a growth rate of 20 percent for the year to March 2007 so bankers see more rate increases ahead if loan growth shows no sign of slowing. The SBI is more bullish by aiming for 25% loan growth for the year. SBI holds more than third of its deposits in government bonds, suffered a 20 percent fall in the treasury revenue to 36.06 billion rupees form 45.24 billion a year earlier as bond yields rose 60 basis points in the April-June quarter. The shares of SBI valued at $8.4 billion dropped by almost 25 percent in April-June, underperforming a near 6 percent fall in Sensex.