Rate cut may hit SBI profit

Largest loaner likely to lose Rs 600 chromium involvement income in FY09.

The determination of State Depository Financial Institution of Republic Of India (SBI), the country's biggest bank, to cut down its premier loaning charge per unit (PLR) may ensue in the depository financial institution losing about Rs 600 crore of involvement income on loans in 2008-09. The likely loss in involvement income is over 13 per cent of SBI's nett net income of Rs 4,541 crore in 2006-07.

The impact of the 25 footing points cut in PLR to 12.50 per cent, just a twenty-four hours before the public sector depository financial institution chiefs' meeting with the finance curate on Tuesday, in the current one-fourth would be just about Rs 100 crore, as involvement on most of the loans would be reset during the April-June 2008 quarter.

Canara Bank, the other major loaner to cut PLR, is expected to see an involvement income loss of about Rs 100 crore. ICICI Bank, the biggest retail lender, have refrained from cutting its PLR, as it is saddled with a very high cost of deposits. The 2nd biggest bank's cost of sedimentations was 7.4 per cent at the end of December 2007 against SBI's 5.55 per cent.

SBI's loan portfolio at the end of December 2007 was Rs 3,95,343 crore and that of ICICI Depository Financial Institution Rs 2,15,517 crore.

A senior SBI executive director said the PLR cut would ensue in its nett involvement border (NIM) shrinkage by about 3 footing points. The bank's nim at the end of the 3rd one-fourth of 2007-08 was 2.83 per cent.

The depository financial institution trusts that it will be able to convey down its cost of funds, which will assist in partially offsetting the impact of the cut in PLR. The majority sedimentations it had raised at high rates in the 4th one-fourth of 2006-07 are maturing now.

With comfy liquidness in the system, the pricing of sedimentation renewals is likely to go on at comparatively less rates.

UCO Depository Financial Institution was the other loaner to cut down its PLR and it too may take a hit on its involvement income. Other populace sector Banks have got refrained from cutting their PLRs as they make not see it feasible.