SBI Q2 net down 35% on MTM hit; NPAs stable

Written by fe Bureau | Mumbai | Updated: Nov 14 2013, 10:44am hrs
State Bank of India (SBI) on Wednesday reported a net profit of R2,375 crore for the three months to September 30, a 35% year-on-year drop, owing to higher provisions for bad loans and a mark-to-market loss on its bond portfolio due to a steep rise in yields. The bank expects its loan book to grow by 16-17% this year.

Chairman Arundhati Bhattacharya said at a press conference she was not comfortable sharing an outlook though she hinted there could be some more pain with few indications of an upturn. The situation is very volatile as you know very well and therefore, I have said from the beginning that Id rather wait for the long term than give a short-term outlook. I think more pain is there. We are not seeing indicators saying things are beginning to look brighter, she said.

Indias largest lender showed a deterioration in asset quality as gross non-performing assets (NPAs) rose 5.44% sequentially to R64,206 crore. As a ratio of total assets, gross NPAs stood at 5.64%, up 8 basis points from the quarter ended June 30.

The net NPA ratio too was up 8 bps on a quarter-on-quarter basis at 2.91% of total assets. The bank restructured loans worth nearly Rs 8,585 crore during the July-September period and has a pipeline of Rs 6,000 crore which may be spread over the next two to three quarters, Bhattacharya said.

Fresh slippages during the quarter, however, fell to Rs 8,365 crore, as compared with Rs 13,766 crore in the April-June period. Of this, Rs 4,796 crore has come from the mid-corporate book.

Operationally, the bank had a strong quarter with net interest income for the three-month period rising 11.5% from a year ago to Rs 12,251 crore, supported by healthy growth in total advances of 19.18%, which stood at Rs 11,39,326 crore. The banks deposits stood at Rs 12,92,456 crore, showing a growth of 14% year-on-year.

Provisions for the quarter stood at Rs 3,028 crore, up 66% from a year ago. Of this, loan loss provisions were up 44% from a year ago at Rs 2,645 crore.

SBI also provided nearly Rs 700 crore during the quarter for the MTM hit it took on its treasury portfolio. As SBI chose to amortise its losses and spread the hit over the span of the year, it will be providing nearly Rs 700 crore in each of the October-December and the January-March quarters.

The other reason is the staff expenses that have gone up quite sharply since we have had to make a 15% provision for wage negotiations. We have also had to make additional provisions as LIC has changed its mortality table, The bank will be setting apart a total of Rs 1,200 crore over the next two quarters, by way of provisioning for pensions. Higher provisioning requirement for standard restructured assets under Reserve Bank of India (RBI) fresh guidelines have hurt significantly as well, Bhattacharya said.

According to Shyamal Acharya, deputy managing director of the mid-corporate segment of the bank, nearly Rs 4,500 crore worth of slippages in this segment are in large chunky accounts from the power, iron and steel and the infrastructure sectors.

In case we are able to restructure them or take these accounts to the corporate debt restructuring (CDR) cell, there will be some upgradation. If not, there might be some more slippages. What we are trying to do on this side is to catch some early warning signals and push them into some kind of restructuring to ensure that they dont get into severe trouble, Bhattacharya said.

Domestic net interest margin rose 4 bps sequentially to 3.48%. Bhattacharya, however, refused to give an outlook on margins citing volatile market conditions.

Additionally, SBI plans on raising Rs 8,000-9,000 crore through qualified institutional placement and has already applied for government approval, Bhattacharya said. If the bank is able to raise nearly Rs 9,000 crore, the government shareholding will come down to around 58% from the current level of more than 62%, she said.