SBI looks for upgrade, March profits up 24%

Written by fe Bureau | Mumbai/Kolkata | Updated: May 19 2012, 05:46am hrs
Turning in better-than-expected numbers, State Bank of India (SBI) on Friday reported a net profit of R4,050 crore for the three months to March 2012, a sequential increase of 24%. Net profit in the March, 2011 quarter had collapsed to R20.88 crore with the bank cleaning up on multiple fronts. On Thursday, however, the Street celebrated SBIs improved asset quality and robust net interest margin (NIM) sending the stock up 5.08% to R1,942 on the Bombay Stock Exchange. The bank ends 2011-12 with a net profit of R11,707 crore, up 42%, having seen a growth in gross advances of 16% during the year.

The banks net interest income in the March 2012 quarter rose a sharp 44% y-o-y to Rs 11,591 crore. SBI notched up a NIM for the stand-alone entity of 4.17%, saying it should be possible to hold them at these levels despite the challenge of mobilising retail deposits. The quality of the banks balance sheet improved with gross non-performing assets (NPAs) falling to 4.4% at the end of March, 2012 from 4.6% at the end of December, 2011. Net NPAs too fell sequentially to 1.82% from 2.22% and fresh slippages in the March, 2012 quarter were R4,383 crore, way below R8,161 crore seen in the December, 2011 quarter. We seem to be on top of the situation are not seeing any sharp deterioration in asset quality. We have seen some strong recoveries in the retail space and that has helped, chairman Pratip Chaudhuri observed. At the end of March 2012, loan loss provisions were R11,546 crore, up 31.3% over March 2011.

However, the quantum of loans restructured rose to R5,134 crore compared with R2,100 crore in the December quarter. The accounts of Kingfisher and Air India have been restructured with the former being classified as a doubtful loan and the latter as a standard asset. SBIs exposure to Air India is R1,200 crore and fully secured while the exposure to Kingfisher is R1,400 crore. RBI has allowed Air India to remain a standard asset as a special dispensation, the management clarified. SBIs restructured portfolio now stands at R37,000 crore. The banks provision coverage ratio has gone up to 68%.

The countrys largest lender now has a Tier I capital adequacy ratio of 9.79% and a combined capital adequacy of 13.86%. It may be recalled that Moodys had downgraded one of the banks instruments last October on concerns of rising delinquencies and a fall in Tier-I capital to 7.7%. Should the requirement arise, we will have the flexibility to do a qualified institutional placement, but we will wait a while. There are enough avenues to augment capital, Chaudhuri said.

The chairman said the bank had approached Moodys soon after the government had infused Rs 8,000 crore and the Tier I capital had risen above 8%. Perhaps they are waiting for us to finalise our results, Chaudhuri said.

SBI believes it could grow its loan book by around 16-18% though Chaudhuti cautioned that the environment was a difficult one. The management pointed out that the situation in the international space, where last year loans grew by 8%, was also challenging. The bank says it is necessary to grow deposits by about 20% but Chaudhuri said that could be a big challenge since banks cant be oblivious to returns from other competing instruments. SBIs share of cheaper CASA deposits is currently at 46%.