State Bank of India (SBI)’s net profit more than doubled in the third quarter owing to a 59% growth in other income and lower bad loan provisions. Speaking to reporters, chairman Arundhati Bhattacharya told reporters that the bank does not expect to go beyond 6.5% credit growth in FY17. Excerpts…
What were the reasons behind this growth in net profit ?
In respect of other income, it shows a very healthy growth y-o-y of 58.73% and even if we take out the on time income from SBI Life stake sale, it’s up 35% y-o-y, and for the quarter it is up by 30%.
Total provisions have seen an increase but in case of the loan loss provision, they have come down q-o-q and also if you consider
y-o-y too, the loan loss provisions have come down. However, the standard assets provisions have gone up and I would like to say that the entire amount that we got from SBI Life stake sale has been kept as provision against stressed standard assets. So going forward should there be any stress in this area, we are well prepared for the same.
Moreover, this is the function of the fact that in Q3 last year we took the maximum brunt of the asset quality review (AQR) impact and that profit was not in line with what we have been doing.
Have corporate loans been growing?
While domestic advances have gone to R12.11 lakh crore, commercial paper has gone up to R45,000 crore. In last December, commercial papers were R33,000 crore, so a growth of 36% can be seen. In corporate bonds too, there has been a growth of 18% where we have gone up from R41,000 crore to R48,000 crore in Q3 FY17. So if you consider these two growths as well, the total assets of the bank has grown 6.72%, but the growth for only the loan portfolio is around 4.81%. There is movement of the better rated corporates from the loan book into the money markets and into the bond markets and therefore these numbers give a flavour where our money is getting invested.
How are loan resolutions shaping up?
See we were very hopeful that things would really start moving in this quarter. However, demonetisation has actually put us back by a quarter, so we are working very hard but I do not know if they can come in this quarter or may be they will slip over to the next year. What I had said earlier was obviously without taking into account the impact of the demonetisation.
What is your outlook on loan growth and slippages?
Overall as I said, retail is growing very well and if you see the numbers there, retail growth is about 18%. In respect of the corporate loan book, the growth is very low and though we expect it to come up in Q4, we would like to be cautious. So overall we are not expecting to go above 6.5% in terms of loan growth for the full year.
We have already given an outlook of R40,000 crore of slippages for this year and I do not see that number coming down.
Currently we have seen slippages of around R29,316 crore in the last three quarters of FY17. The good thing in this area is that our gross impaired assets (NPA + standard stressed assets) has come down from 9.61% to 9.54% in Q3 and the net impaired assets have also reduced from 6.74% to 6.63%. Currently, in respect of the stressed standard assets we hold more than R6,000 crore of provisions and to that extent the bank has been extremely conservative and tried to strengthen the balance sheet. Going forward, from the next year, definitely things will start looking better. In fact, had there been top line growth, it would have started looking better this quarter itself. But because of the weak top line the percentages of bad loans have not declined.
Why have your staff expenses grown in Q3?
On staff expenses, we have shown a rise of 16.57% y-o-y, mainly on account of the fact that the contribution for employees has gone up. Last year, we were making R500 crore additional contribution, which was completed by the end of last year owing to the revision of the bipartite negotiations. But this time, not only have we maintained that, we have even gone above it by another R500 crore. We expect to make something similar in coming quarters.
Are you ruling out rate cut despite governor saying there is scope for further cuts?
That is what the governor talked about. I do not know which bank he talked about. If you see from the beginning of the rate cut cycle, we were at 10% at that time and today we are at 8%. So, our MCLR cut has been a 200 bps. RBI, since the beginning of the cycle has cut only 175 bps.
So we are ahead of RBI in the cuts. So therefore at this point of time it seems unlikely unless there is some sudden change of situation which I am not able to envisage right now. But, we will keep monitoring and whatever is warranted, it will be done.