The bank is expected to record a net profit of around Rs 1,200-1,250 crore according to an "optimistic estimate", down from Rs 1,862 crore in 1997-98. The SBI board will meet in Calcutta on June 24 to pass the annual accounts."There could be an over 30 per cent drop in the bank's net profit. This is hardly surprising as in the previous year the bank had had the advantage of a massive depreciation writeback on account of the fall in the yield to maturity of government papers," sources close to the SBI management said. In the first three quarters of fiscal 1999, SBI posted a net profit of Rs 1,143 crore. "This trend cannot not be maintained," analysts admitted.

Post-tax, the bank had used over Rs 600 crore worth of depreciation writebanks to shore up its bottomlinein fiscal 1998. Besides, the bank also had a windfall gain of Rs 180 crore on account of income-tax refunds in the previous year.

"If one takes into account the 1998 net profit shorn of depreciation writebacks and other windfall gains, a Rs 1,200-1,250 crore profit in fiscal 1999 would show a handsome growth," the sources maintained.

According to them, the finance ministry is not allowing SBI to stagger the RIB issue expenses (relating to payment of commission to collecting banks) as this was a deposit mobilisation programme and not a public issue. Other factors that will hit the SBI's bottomline in fiscal 1999 include: a hefty provision for employees' wage increases, higher provisioning towards non-performing assets and over Rs 100 crore of provisioning to bridge the gap between the net asset value (NAV) and assured returns of one SBI mutual fund scheme which is due for redemption this month.

The bank had last year provided for Rs 100 crore towards employees' wage increments.

It may require to makean additional Rs 300 crore provision on this account in the 1999 balance sheet. It can, however, claim Rs 180 crore (net of tax) which it had provided for in the first three quarters of 1999 towards gilts appreciation as the YTM of longer dated securities actually came down.The SBI's bottomline is under pressure as its spread came down by 20 basis points from 3.57 per cent to 3.37 per cent in the third quarter of 1999 and fee-based income took a dip in the absence of substantial LCs, guarantee and forex business. Another worrying factor, senior analysts pointed out, is that the bank has been steadily losing market share in deposits as well as advances over the last few years.In fiscal 1999, gross advances grew by Rs 8,200 crore to Rs 78,000 crore. On the deposits front, despite the $4.27-billion RIB mopup, the bank could not match the average deposit growth of the industry. "One way to judge the bank's health is the growth in its operating profit. The SBI's operating profit has not been able to showsubstantial growth over the last few years. If it is able to maintain a good growth in its operating profit in fiscal 1999, the dip in net profit on account of one-time expenses should not worry investors," analysts pointed out.