State Bank of India (SBI) on Friday reported a net profit of Rs 1,115 crore for the three months to December, down 62% from a year earlier, on the back of higher loan loss provisions. The lender’s bad loan provisions for the quarter rose 59% year-on-year (y-o-y) to Rs 7,645 crore.
Fresh slippages — or incremental bad loans — in Q3FY16, came in at Rs 20,692 crore. Of this, Rs 14,792 crore originated from the Reserve Bank of India’s asset quality review (AQR).
SBI chairman Arundhati Bhattacharya said at a press conference the slippages were the highest ever reported in a quarter. “About half of the RBI’s AQR has been recognised in Q3. Possibly we could see similar slippages in Q4 as well,” she said. The chairman explained that certain accounts had not been classified as non-performing assets (NPAs) this time around since it was likely a solution to the problems would be found soon. In the event lenders were able to resolve the issues, slippages in the fourth quarter could be smaller, she said.
“On the other hand, there are accounts that have been classified NPAs in other banks but perhaps not with us. Now if those are required to be classified by us, then it could be a little more,” she added.
The country’s largest lender did well to grow advances to large companies by 20.6% on an annualised basis to Rs 2.49 lakh crore. Bhattacharya said exposure was taken to corporates rated A and above. “I would like to say that in the last nine months, just 28% of the new connections have been with companies rated below A and 72% have been with companies rated above A,” she said.
Bhattacharya said SBI’s credit growth in FY16 would be around 12-13%.
“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,” Bhattacharya said. The bank’s total advances grew 12.88% y-o-y to Rs 12.65 lakh crore and deposits grew 10.86% y-o-y to Rs 16.71 lakh crore in Q3 FY16.
On capital raising plans, Bhattacharya said that the bank plans to raise Rs 6,000 crore in tier 2 bonds in Q4. It is also looking to raise Rs 1,000 crore from divesting its non-core assets and Rs 2,500 crore by reducing stake in joint ventures by FY17.
Operating profit of the public sector lender rose 2.25%% y-o-y to Rs 9,598 crore, while its domestic net interest margin (NIM) fell 28 basis points (bps) y-o-y to 3.22%. SBI’s net interest income — the difference between interest earned and interest expended — fell 1.24% y-o-y to Rs 13,606 crore.
SBI’s asset quality took a beating in the September quarter, with gross NPAs as a percentage of gross advances rising 95 bps sequentially to 5.1% to Rs 72,792 crore. The net NPA ratio also witnessed a sequential rise of 75 bps. The largest chunk of NPAs came from the mid-corporate segment, which reported a gross NPA of 14.33%, followed by agriculture at 8.5%. The bank also restructured loans worth Rs 1,554 crore in the quarter.
Recoveries in Q3 at Rs 659 crore were 10% higher than the same period last year and the bank also upgraded accounts worth Rs 378 crore from NPA to standard category. Shares of India’s largest bank fell as much as 4.31% on the BSE in intra-day trade, before ending at Rs 154.20, down 2.99%.