State Bank of India (SBI) on Friday reported a net profit of R2,538 crore for the September quarter, down 35% from a year ago, as provisions for bad loans almost doubled on a year-on-year basis to R7,670 crore.
Chairman Arundhati Bhattacharya said recoveries are expected to gain momentum owing to more clarity and visibility on resolutions going forward. “I will definitely say that visibility is much greater regarding the resolutions of many large value accounts.”
The public sector lender failed to meet Bloomberg profit estimates of R2,585 crore for the reviewed quarter.
According to Bhattacharya, a number of new players have come up who specialise in operations and management (O&M). “So even where we are not able to get a buyer we can do the conversion of debt to equity and put an O&M player. That will also give us a lot of comfort going ahead.”
The bank reported a healthy rise in other income at R8,424 crore, up 36% from the same period last year. Of that, R4,317 crore was in the form of fee income and R2,291 crore was on account of profit booked on investments.
Of total slippages of R10,341 crore into the bad loan category for the quarter, R4,853 crore originated from the watch list. “We have said that slippages will be around R40,000 crore and what we are saying is that slippages from the watch list and the restructured book is still ranging between 75-80%. Therefore, around 25% will be outside the watch list.” the chairman said.
In Q4 last year, the bank had created a watch list of accounts worth R31,352 crore and expected 70% of it to slip into the non-performing category in a worst-case scenario. It now stands at R25,951 crore following fresh slippages in the September quarter.
India’s largest lender reported a 9% year-on-year (y-o-y) growth in operating profit at Rs 11,224 crore for the quarter under review. SBI’s net interest income — the difference between interest earned and interest expended — grew 1.29% y-o-y to Rs 14,437 crore. The NIM – a key measure of profitability – fell 27 basis points (bps) y-o-y. Its capital adequacy ratio (CAR) rose 177 bps y-o-y to 13.94%.
The asset quality deteriorated in the September quarter, with gross NPAs as a percentage of gross advances rising 20 bps sequentially to 7.14%. The net NPA ratio also witnessed a quarter-on-quarter rise of 14 bps. The largest chunk of NPAs came from the mid-corporate segment, which reported a gross NPA ratio of 10.62%, followed by SME at 8.72%.
Recoveries in Q2 were at Rs 1,344 crore and the bank upgraded loans worth Rs 206 crore from non-performing to standard.
SBI reported loan growth of Rs 8.1% y-o-y to Rs 14.81 lakh crore and its total deposits grew 13.7% y-o-y to Rs 18.58 lakh crore.
“In the second quarter, loan growth was very slow for various reasons. We have internally taken the decision about not really increasing our exposure to those areas where peripheral business is not there. To that extent, we will stick to our original target of between 11% and 12%. At the end of the third quarter, we will try to give guidance whether we can come up to that level,” Bhattacharya said, adding that the bank has moved around Rs 26,000 crore of loans to its investment book in the April-September period.
Shares of SBI fell as much as 3.9% on the BSE in intraday trade before closing at Rs 272.9, down 3%. On a year-to-date basis, the scrip was up 21.61% against a 2.7% rise in the Sensex in the same period.