[sbinews] SBI to stick with new accounting practice -Economic Times
- From: "Rajendra S. Pai" <rs.pai@xxxxxxxxx>
- To: <sbinews@xxxxxxxxxxxxx>
- Date: Sat, 28 Aug 2004 08:59:06 +0530
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SBI to stick with new accounting practice
(Economic Times)
TIMES NEWS NETWORK[ SATURDAY, AUGUST 21, 2004 03:46:58 AM ]
MUMBAI: Faced with hardening yields, the country's largest bank, State Bank
of India (SBI), will continue to stick to a less conservative accounting
practice to show profits.
The change, relating to gains in the bank's investment portfolio, was
introduced for the first quarter and will now continue for the rest of the
year.
The change in accounting practice helped the bank shore up its bottomline by
Rs 2,242 crore in the first quarter. Till March 31, '03, SBI followed a
conservative accounting practice compared to its peers in the industry with
regard to valuation of its investment portfolio.
In the first quarter, the bank decided to move towards a practice followed
by other banks, something that raised analysts' eyebrows.
Had the bank not changed the valuation practice, profits would have been
down by Rs 2,242 crore.
SBI reported operating profits of Rs 2,071.4 crore (Rs 2,526 crore) and net
profits of Rs 1,058 crore (Rs 900 crore) in the first quarter.
Analyst said that the rise in the yield of government securities in the
first quarter reduced SBI's trading profits by 71% to 373 crore in the first
quarter. "At present, we have adequate reserves and thus, we are not looking
at drawing from IFR," said SBI chairman AK Purwar.
Basically, SBI changed its basis of valuation of securities in the
'available for sale' (AFS) and 'held for trading' (HFT) categories. As per
the new practice, the appreciation and depreciation in these two portfolios
were adjusted against each other.
As per the old practice, each scrip was valued and any appreciation was
ignored, while depreciation was provided for. Mr Purwar said, "Only SBI and
its associate bank State Bank of Patiala were following the conservative
practice, unlike other banks in the industry. But from the beginning of the
first quarter, SBI decided to follow valuation guidelines prescribed by the
Reserve Bank of India and that followed by other banks."
The first quarter results of SBI said, "As per the new practice, investment
is valued after netting off classification-wise depreciation and
appreciation, computed scrip-wise and providing for net depreciation in each
classification, while ignoring appreciation. The earlier practice relates to
providing for depreciation script-wise and ignoring appreciation."
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