SBI posted a 99 per cent drop in net profit at Rs 21 crore for Q4 ended 31 March 2011

State Bank of India posted a 99 per cent drop in net profit at Rs 21 crore for the fourth quarter ended 31 March 2011 against Rs 1867 crore during the corresponding period in 2010. SBI reported their worst quarterly performance in more than a decade-a mere Rs 21crore profit for the quarter ended March 2011.

The bank’s provisions for bad loans in the fiscal fourth quarter rose 49 per cent to Rs 3264 crores from Rs 2187 crores a year ago, while operating costs increased Rs 6794 crores from Rs 6036 crores. Tax expenses in the quarter also nearly doubled to Rs 1900 crores. The bank's net non-performing assets rose to Rs 12350 crores at March-end 2011 from Rs 10870 crores in 2010. Loan loss provisions were at Rs 3264 crore while that for standard assets and investment depreciation was at Rs 631 crore and Rs 304 crore respectively.

The drop is being seen as an outcome of a major clean-up exercise by new chairman Pratip Chaudhuri, who aggressively set aside funds for bad loans and employee retirement benefits. Chaudhuri is also believed to have set aside Rs 500 crore on outstanding teaser rate home loans in keeping with RBI's directive-a move resisted by former chairman O P Bhatt.

The results worried stock markets which saw the scrip drop 8% to Rs 2413. Most analysts had not expected profits such a sharp fall.

The net interest margins (NIM) which is the difference between the cost of funds and interest income- shrank. The fourth quarter numbers dragged down overall net profits down 9.84% to Rs 8265 crore from Rs 9166 crore in financial year 2010. The result as disappointing since several of them had expected the bank to cross the Rs 10000-crore mark in terms of net profit.

The bank's deposits grew 16.14% to Rs 933933 crore up from Rs 84116 crore in financial year 2010. Advances in financial year 2011 grew 20.32% from Rs 641480 crore to Rs 771802 crore.