SBI set to join $1 billion club

State Bank of India, the country's largest bank, is set to join the elite league of $1 billion club when it announces its 2005-06 results on May 19.

The SBI will be the first Indian bank to reach the $1 billion net profit milestone as it unveils its 2005-06 results after its board takes on record the financial statement in Kolkata this Friday.

Analysts said SBI could post a net profit of around Rs 4,650 crore (Rs 46.50 billion) as it absorbs windfalls from recoveries made against loans written-off and on revision in commission rates on government businesses.

For the nine months ended December 31, 2005, SBI reported a net profit of Rs 3,553 crore (Rs 35.53 billion).

SBI's 2005-06 bottom line will get a boost from around Rs 1,000 crore (Rs 10 billion) of recoveries made against written off non-performing assets and also from a gain of another Rs 160 crore (Rs 1.6 billion) as the government reverted to the old method of commission for handling its receipts and payments.

Banks handling governments' payments and receipts will now get commission on the basis of per transaction and not on the basis of the size of a transaction as was proposed in early 2005.

SBI will, however, be hit by a provision of about Rs 600 crore (Rs 6 billion) for depreciation in the market value of investments following a sharp rise in yields on bonds on the last day of the last of the last financial year.

"The bank could have touched the magic figure of Rs 5,000 crore (Rs 50 billion) but for provisions it would need to make in the last quarter. We expect the bank to post a net profit of around Rs 4,650 crore (Rs 46.5 billion)," said a banking analyst.

SBI will join the likes of Citigroup, Hongkong and Shanghai Banking Corporation, JP Morgan Chase, Royal Bank of Scotland, Bank of America and UBS, which report profits of more than $1 billion.

India's second largest bank, ICICI Bank, is still to catch up with SBI. The private sector's bank's net profit in 2005-06 was $ 569 million (Rs 2,540 crore).

SBI is also the only Indian bank to feature in the top 100 banks ranked in terms of Tier 1 capital. It was ranked 93rd by The Banker in July 2005.

SBI, with a customer base of 100 million, enjoys an 18 per cent market share in both advances and deposits, 35 per cent in foreign exchange business and 60 per cent in government business.

The SBI scrip ended seven per cent higher at Rs 989.70 on Wednesday on the Bombay Stock Exchange.