State Bank of India (SBI) on Friday reported a strong set of numbers with net profit coming in at R2,910 crore in the December quarter, up 30% year-on-year, on the back of higher other income, which rose 24% y-o-y. Operating profit at the public sector lender showed a healthy increase of 22% y-o-y to R9,294 crore, while its domestic net interest margin (NIM) rose 2 basis points (bps) sequentially to 3.5%.
Asset quality was steady with the gross non-performing assets (NPAs) as a percentage of gross advances increasing by just 1 basis point sequentially to 4.90%. The net NPA ratio, however, saw a sequential rise of 7 bps.
The results cheered the Street, sending the stock soaring 8.3% on the BSE in intra-day trade. The stock ended Friday at R307.05, up 8%.
Addressing a press conference, SBI chairman Arundhati Bhattacharya said she expects credit growth to pick up in another two to three quarters, adding that SBI’s credit growth in the current year would be 10%.
“For the next two quarters, growth will remain a little muted because we have to wait for projects to come in. So far, we have have seen some amount of takeover finance where we have refinanced completed projects and also financed completion of some stuck projects,” she said.
Bhattacharya added that SBI had received loan requests for eight large projects under the 5/25
category (projects over Rs 500 crore that are extended long-term loans of 20-25 years) and is processing them.
Bhattacharya believes it would be premature to say that NPA pains are over and that it would be wise to wait for a quarter or two.
“We would like to say it (NPAs) will remain down but we have to also understand that the top line has not really increased much. Had the top line had the kind of robust increase that we normally see, the percentages would have been down,” she said.
In absolute terms, gross NPAs rose marginally by 2% to Rs 61,991 crore on a sequential basis. Bhattacharya explained that the
bank has been monitoring accounts closely and is looking at NPA resolutions through one-time settlements, auctions and legal procedures. “We have been doing everything in the book in order to get the NPAs resolved as quickly as possible. As you know we have a whole set-up now which looks only at NPA resolution and it has been strengthened considerably,” she added.
Recoveries and upgrades in the December quarter fell 76% y-o-y to Rs 667 crore and Bhattacharya attributed that to the fall in sales to asset reconstruction companies owing to the hike in upfront payment requirement.
SBI reported a 9.2% growth in net interest income (NII) to Rs 13,777 crore while other income grew 24.2% to Rs 5,238 crore owing to higher gains from sales of bonds.
The bank booked a profit of Rs 920 crore in Q3 FY15 on sale of investments.
The bank’s provisions for bad loans grew 37.5% y-o-y to Rs 4,717 crore in Q3 FY15 and its total provisions were up 18.5% y-o-y.
The mid-corporate segment accounted for the largest chunk of bad loans at 11.85% of the advances in its category followed by agriculture at 10.04%.
The bank restructured loans worth Rs 9,568 crore in the December quarter and the pipeline for the rest of the fiscal stands at Rs 5,000-5,500 crore. Slippages fell 8.5% q-o-q to Rs 7,043 crore. Total advances as on December 31 stood at Rs 12.65 lakh crore crore, up 6.9% from the year-ago period.
Credit to large corporates increased by 20% to Rs 2.39 lakh crore and retail advances rose 12.7% to Rs 2.6 lakh crore on a year-on-year basis but the mid-corporate segment saw a 0.3% y-o-y decline in advances at Rs 2.21 lakh crore. SBI’s deposits increased to Rs 15.1 lakh crore, showing a y-o-y growth of 11.8%.