Public sector lender State Bank of India (SBI) on Friday reported a 62% y-o-y fall in net profit in Q3 and fresh slippages of Rs 20,692 crore. Speaking to reporters, chairman Arundhati Bhattacharya said she expects SBI’s loan book to grow by 12-13% in FY16 following huge increases in NPAs and subsequent decline in risk appetite. Excerpts:
How has the RBI’s asset quality review affected SBI?
About half of the RBI’s AQR has been recognised in Q3. Possibly we could see similar slippages in Q4 as well. What has happened is that of the ones that we have not done in this quarter, many of them are those where resolutions are in advanced stages. Those are the ones we have not taken this quarter. So should those plans materialise, that number could be less. On the other hand, there are accounts that have got classified in other banks may not be with us. Now if we look at those accounts and if those are required to be classified by us then it could be a little more. But it would be around this number.
If you ask us we have had major numbers in steel, one major account in textile, and of course there will be one or two major accounts coming up which could also be in the area of power. So these are all accounts that are known as weak. They were not technically NPAs but were weak. Those are the accounts that are getting classified currently.
Will the bad loans pain continue?
This is very difficult for us to give an exact call on what is going to happen in the next financial year. We should talk about that in the next quarter. Most of the pain will be taken to the extent possible within the year. But there might be something residual in the coming financial year as well. It is not that the stress in some accounts were not known. It is not something that has suddenly happened. The only difference is that earlier we were still hoping that the resolution could happen in time.
Have you sold any account to ARCs and how many accounts have been refinanced under 5/25?
ARC sales are very very little. They are around Rs 395 crore in Q3 and Rs 786 crore in the first nine months of FY16. We have refinanced 13 accounts under 5/25 scheme worth Rs 16,951 crore in the first nine months of the fiscal and in Q3 we used 5/25 in seven accounts worth Rs 7,743 crore and have a pipeline of Rs 4,000 crore.
Why has your net interest margin dropped?
The NIM has dipped due to several factors. One of them is the 70 bps cut in base rate. The other reason is probably the kind of growth we needed to see has not happened in the credit book. If you look at our investment book, actually the deployment has been as high as 21% in investment assets and as you know the margin in investment assets is obviously lower than when you put it in the loan book. So credit growth has not kept pace with the kind of deposit accretion we have seen. When you classify there is a lot of interest clawback and when the classification happens in a restructured account which has happened for us, the interest claw-back goes right back to the date when it was restructured. These are the three major reasons for the compression in NIMs.
How much has SBI written off in Q3?
Write-offs mostly happen in the historical portfolio and doesn’t happen in the recent portfolio. In Q3, our write-offs stood at Rs 3697 crore and it was Rs 3941 crore in Q2 FY16. If you look at Q3 FY15, we had written off Rs 5,096 crore of assets.
Have you revised your credit growth target of 14% in the face of rising NPAs?
We grew last quarter at 12.88% and frankly speaking had we gone on in the same manner we would have reached the 14% target in FY16, at least 13% was possible. However, there is something that we need to consider now. When you have such huge increases in NPAs, the risk appetite of any organisation goes down, and therefore, it is very difficult at that time to see any big growth in advances.
The recoveries have also been tepid in the quarter. What are the reasons behind it?
We do not have the authority to walk into an organisation, put a lock on the door and walk away with the key. There are certain processes that you need to follow and those processes need to be very efficient. For instance, when we go to a debt recovery tribunal, today we have more than 25,000 cases pending in the debt recovery tribunals (DRTs). The number of average adjournments we get in DRTs is around 12-15 and sometimes we even get as many as 58 adjournments in a case.