The bank's board met in Mumbai on Thursday to take into account the unaudited results of the third quarter.

The SBI scrip lost Rs 3.70 to close at Rs 165.50 on the Bombay Stock Exchange against its previous close of Rs 169.20. The decline in the price was in tandem with the general bearish sentiment which gripped the market towards the closing hours of the trading session on Thursday, wiping 70 points off the Sensex.

Admitting the pressure on the spread, State Bank chairman MP Radhakrishnan said: "The spread has come down from 3.28 per cent to 3.2 per cent. We will focus on volume-driven business. Even though on a point-to-point basis the credit growth was minimal, the averageadvances in nine months registered an increase of 16.49 per cent. What is important is average advances and not the point-to-point growth." Incidentally, the bank had projected a 16 per cent point-to-point growth in net credit in fiscal 1999.

Taking into account the bank's subscription to corporate debentures and other instruments, the total credit flow to the commercial sector was pegged at 5.19 per cent.

The State Bank's deposit portfolio, in contrast, grew at 9.31 per cent in the current fiscal. The average domestic deposits, however, grew at 17.63 per cent, (excluding the proceeds of the Resurgent India Bonds), from Rs 112,927 crore to Rs 132,831 crore.

The net non-performing assets (NPAs) of the bank during the period grew marginally from 6.1 per cent to 6.2 per cent. "The gross NPAs also grew marginally. This is bound to happen when there is an industrial slowdown. We are trying to help the industry by extending the credit period of 30 to 60 days," Radhakrishnan said.

The SBI chairman alsocommitted to support all "viable" projects in the steel sector by restructuring loans and waiving penal interest.

The bank's interest income in April-December was to the tune of Rs 13,648.88 crore (Rs 11,337 crore) while other income grew from Rs 1,767.17 crore to Rs 2,154 crore. The operating profit jumped by 22.95 per cent from Rs 1,880.57 crore to Rs 2,312.21 crore and after providing for Rs 1,169.21 crore (Rs 967.97 crore) towards provisions and contingencies, the net profit stood at Rs 1,143 crore (Rs 912.60).

"We have made prudential provisionings... Going by the trend in the government securities market, we may be able to write back a part of the provisioning," Radhakrishanan said.

One of the major contributing factors to SBI's profit growth was the income from its overseas operations. Net interest income from overseas operations has registered an increase of 29.93 per cent while the non-interest income grew by 30.20 per cent. The operating profit of foreign offices has registered a growth of64.17 per cent.

Insight

YTM to be key factor in Q4

A squeeze in margins has led to a steep fall in SBI's net profit between the second and third quarters -- from Rs 431 crore to Rs 285 crore. Since the bank does make provisions for standard assets on an ongoing basis, it is unlikely that there would have been too much of an impact on account of additional provisions. Further, it was expected that there would not be much of an inflow from profit on sale of investments which had led to higher profits in earlier periods. For banks in general there has been no growth from the second quarter to the present one on account of non-interest income as treasury income has been lower. For the fourth quarter, the YTM would be all important.