State Bank of India (SBI) on Friday reported a net profit of Rs 2,006 crore and slippages of Rs 26,249 crore.
State Bank of India (SBI) on Friday reported a net profit of Rs 2,006 crore and slippages of Rs 26,249 crore. Arundhati Bhattacharya, chairman, said the bank’s credit growth will be in the range of 6- 8% in FY18, likely to be driven by retail, SME, agri and select corporate sectors.
What were the reasons for slippages in Q1?
During this quarter, the kind of follow-up we need to do on the retail side went missing. That was expected and we were aware that it was going to happen. It happens when one does not have the mapping as to which branches or which accounts one is supposed to look at, and therefore, cannot really follow up. That slippages are in the range of Rs 26,249 crore. Of this Rs 8,363 crore are from the corporate accounts, where 95% have come from the watch list. Some 19 accounts of very small value originated outside the watchlist. The rest of it, Rs 17,886 crore came from the retail book. While we had done the rationalisation of our accounts of Rs 50 crore and above with the associate banks, this had not been done for accounts below Rs 50 crore and for the personal loans book. This is the book we have now aligned with ourselves and has therefore resulted in retail slippages.
Why have the retail and agri asset quality been affected?
The forbearance period that the Reserve Bank of India (RBI) had given for demonitisation has ended and has resulted in a hit of around Rs 1,800 crore. The other aspect of the slippage was in respect of the agri portfolio in states where there is an anticipation of loan waivers. As a result, the national banking group (NBG) book got impacted. This is an area we believe we can pull back in many ways. While for the entire year we are expecting this kind of slippages from the NBG book, to be around Rs 30,000 crore, we expect to pull back sufficiently and net increase is expected to be Rs 7,500 crore.
In the corporate watchlist we have given a guidance of Rs 24,000 crore. As a result, we have said that the slippage ratio, which was at a high of 5.78% in FY17, is already down to 5.38% in the first quarter of FY18 and we expect it to come down to 3.3% for FY18.
What is you outlook on margins?
We have come down on the net interest margin (NIM) front on account of several reasons. It was mainly of account of the reduction of the base rate and the marginal cost of funds based lending rate (MCLR). Moreover, since we have factored in the entire slippages, we believe that going forward the NIM will definitely show some kind of an improvement.
What factors affected loan growth in the quarter?
Although, overall advances show an increase of 1.46% year-on-year (y-o-y), if you take out what went out on account of food credit and the FCNRB loans and add back what we have garnered in commercial papers and in corporate bonds, then the whole bank advances have gone up 5.2%. Basically, the credit book has, to a certain extent, shifted to the market book. If you factor all of these then the growth in advances is not as tepid as it would appear otherwise.
About Rs 40,000 crore of loans have moved to the market. Largely, a lot of corporate advances are taken in the second half of the year and repaid in the first quarter. If you see, about Rs 10,000 crore of fertiliser subsidy, Rs 8,000 crore of oil advances and another Rs 8,000 crore of normal repayments happened. So, almost Rs 40,000 crore of repayments occurred in Q1 FY18 and that impacted the credit growth. Most of them will start to kick back in the third and fourth quarters of FY18 and I am hopeful that the credit growth in the lat two quarters will be much better.