While GNPAs increased q-o-q, overall stress addition remains lower than Q4FY14. Further, in the last few quarters, the bank has demonstrated a conscious effort to step up recovery efforts and mitigate risk on the balance-sheet by prudent growth. GNPAs are up 5% y-o-y, whereas NNPAs are lower by 10% y-o-y.
A shift in the strategy towards retail and SMEs, with focus on improving liability profile, is structurally positive. We expect core PPP and earnings growth of 13% over FY14/17. RoAs are expected to be healthy at 0.9% and RoEs to improve to 17% by FY17.
SIB’s Q1FY15 PAT grew 10% y-o-y to R130 crore. However, core operational performance was weak, led by 30 bps q-o-q decline in NIMs to 2.7%. Slippages for the quarter were R97.5 crore (annualised slippage ratio of 1.2%). Significantly lower upgrades and recoveries, which amounted to R12.9 crore, came as a negative surprise. GNPAs grew 20% q-o-q in absolute terms.
The bank utilised an one-off income of R43 crore (because of change in depreciation policy) to shore up PCR (now at 40% versus 34.9% in FY14). SIB restructured loans of R96.4 crore (0.3% of loans) in Q1FY15 and outstanding standard restructured loans stood at R1,780 crore (5.2% of loans).