State Bank of India on Friday reported a net profit of R3,742 crore for Q4FY15, up 23% from a year earlier, on the back of lower provisioning. Provisions for bad loans fell 2.5% y-o-y to R6,061 crore in Q4FY15.
Speaking at a press conference in Kolkata, SBI chairman Arundhati Bhattacharya said she expected credit growth to take another two quarters to pick up.
The bank reported a credit growth of 7.25% in FY15 — lower than industry’s 12.63%. Gross advances grew to 13.35 lakh crore in FY15 from 12.45 lakh crore in FY14.
Bhattacharya said the project pipeline was very thin in the previous quarter as well, but was firming up gradually with more projects coming in. “I would not see it as a flood yet, but there is a lot of talk, both from the government as well as from many interested people. And some of the projects are now getting submitted. Considering this, I could call the loan growth at around 14% for the year,” she said.
For Q4FY15, the bank restructured loans worth R11,885 crore and slippages fell 32% q-o-q to R4,769 crore.
Bhattacharya said that the restructured amount was “a little higher than expected due to window shutting”.
“The restructuring account was largely contributed by small accounts,” she said. “With any restructuring to be taken as NPA from April 1, many accounts showing weakness opted for recast as people don’t want an NPA tag.”
Operating profit of the public sector lender showed a healthy increase of 17% y-o-y at R12,409 crore, while domestic net interest margin (NIM) rose 4 bps sequentially to 3.54%.
SBI’s asset quality improved with gross NPAs as a percentage of gross advances falling 65 bps sequentially to 4.25% at the end of the March quarter. Net NPA ratio also witnessed a sequential decline of 68 bps. However, the recovery was assisted by sale of bad loans worth R4,510 crore to asset reconstruction companies (ARCs).
In absolute terms, gross NPAs fell by 8.5% to R56,725 crore on a sequential basis. At R4,485 crore, recoveries in the March quarter were seven times higher on a sequential basis; the bank also upgraded accounts worth R676 crore in Q4FY15 from NPA to standard category.
Net interest income (NII) — difference between interest earned and interest expended — grew 14% to R14,711 crore and other income grew 29.3% to R8,515 crore .
According to an SBI official, project loan sanctions have almost been nil. The only solace has come from working capital loan disbursals, and these too have picked up only in the last few months.
Lack of loan demand from companies has been low not only been due to little incremental capital expenditure, but also because many companies have turned to more lucrative and cheaper borrowing options, such as bonds.
Compared to lending rates of banks, corporate bond yields are at least 100-150-bps lower. The lowest bank base rate stands at 9.75%, whereas an AAA-rated public sector unit could borrow in the range of 8.3-8.45% from the corporate bond markets. Corporate bond issuances totalled R4 lakh crore in FY15.