State Bank of India (SBI) on Tuesday reported a loss of Rs 7,718 crore for the three months to March, the lender’s second consecutive quarterly loss in FY18. The losses resulted from a spurt in provisions, largely for loan losses, along with mark-to-market (MTM) losses following a hardening of yields.
The loss would have been much bigger had it not been for a Rs 4,495-crore tax credit.
The lender’s provisions more than doubled to Rs 28,096 crore year-on-year in Q4FY18. However, shares of SBI rose 3.7% on the BSE on Tuesday to close at `254.15 each following an assurance from SBI chairman Rajnish Kumar the recognition of bad loans is over. “As far as the recognition of NPAs (non-performing assets) is concerned, that has been completed and we are fully compliant with the framework issued by RBI (Reserve Bank of India) on February 12,” Kumar added.
India’s largest bank saw its asset quality deteriorate in Q4 of 2017-18, pushing its gross NPAs to 10.91% of total assets or Rs 2.23 lakh crore in absolute terms. However, the bank’s provision coverage ratio (PCR) rose 25 basis points sequentially following a surge in provisions.
SBI projected a better 2020, forecasting a credit growth of more than 12%, a net interest margin (NIM) of more than 3% and a gross NPA ratio of less than 6%.
“If the last year was the year of disappointment, this year is the year of hope, then FY20 will be the year of happiness. Improvements in NIM will come definitely as we have now provided for everything,” Kumar said.
The chairman said the bank’s MTM losses for the quarter were Rs 2,594 crore. While the RBI has allowed MTM losses to be spread over four quarters, the bank has decided not to avail of the benefit. “All of you are aware that 2017-18 was a tough year for the banking industry and SBI was not an exception,” Kumar said.
The bank is undergoing an internal reorganisation, he said. “We view each corporate as a large ecosystem and our focus now will be much sharper,” he added. According to Kumar, all stressed assets are moving to the bank’s stressed assets resolution group, leaving its corporate accounts group and newly named commercial credit group sufficient time to look for good quality assets.
The bank’s net interest income (NII) — the difference between interest earned and expended — fell 5% on an annualised basis to Rs 19,974 crore in the March quarter. Its domestic NIM — a key measure of profitability — stood at 2.67% in Q4, down 25 basis points over the year. “The NII has to be viewed in the context of reversal of income on account of NPA recognition and as well as the decline in marginal cost of funds-based lending rate (MCLR),” Kumar added.
The lender’s capital adequacy ratio fell 51 points year-on-year and 8 basis points sequentially to 12.6% in Q4.
In Q4FY16, SBI had created a watch list of accounts worth Rs 31,352 crore and expected 70% of it to slip into non-performing category in a worst-case scenario. The list had expanded to Rs 32,427 crore following the merger of its subsidiaries with it. The bank said its watch list for FY19 is at Rs 25,802 crore and includes stressed accounts from nine months of FY18 where the standard stressed classification which continue and some new stressed accounts. It also said that Rs 5,662 crore of loans have slipped from strategic debt restructuring and scheme for sustainable structuring of stressed assets.
SBI’s recoveries and upgrades in Q4FY18 were at Rs 8,535 crore. SBI reported loan growth of 4.91% year-on-year to Rs 20.48 lakh crore in Q4FY18 and its total deposits grew 4.68% to Rs 27.06 lakh crore in the same period.