For the first time in 19 years, State Bank of India (SBI) on Friday reported a standalone net loss of Rs 2,416 crore in the December quarter of FY18, owing to higher provisions, higher employee cost and lower other income. Moreover, had it not been for a Rs 4,705 crore tax credit, the loss would have been significantly higher. Analysts had estimated a profit of over Rs 2,000 crore for the quarter, based on data collated by Bloomberg. The bank’s provisions more than doubled on a year-on-year (y-o-y) basis to Rs 18,876 crore in Q3 FY18. Other income too slipped 16% to Rs 8,084 crore. SBI chairman Rajnish Kumar said, one major factor behind the loss was the hardening of bond yields, which required the bank to provision for about Rs 3,500 crore against possible marked-to-market losses. “Treasury income also got impacted and there were no major sale of investments in this quarter and third thing is, of course, provision and payment for employees,” he said. He added that from November 2017, the wage negotiation has become due and the bank has consciously decided to make a provision of about Rs 700 crore. In another major setback to India’s largest lender, the Reserve Bank of India (RBI) has found it under-reported gross non-performing assets (NPAs) to the extent of Rs 23,239 crore in FY17. Consequently, the central bank has asked SBI to set aside Rs 5,721 crore as provisions for those bad loans.
“So there is a combination of factors and then on the top of it, in December, keeping in view the risk-based supervision for March 2017, a few assets which otherwise were in stressed-asset category, have been put in NPA category and consequently, the provision has been made at an enhanced level,” Kumar said. This led to a deterioration in SBI’s asset quality in Q3 of 2017-18 and pushed its gross NPA to 10.35% of total assets or Rs 1.99 lakh crore in absolute terms. However, the bank’s provision coverage ratio (PCR) rose 82 bps sequentially, following the surge in provisions. “I always keep on saying that there is banking beyond NPA,” he added. Acknowledging that FY18 has been a challenging year for the bank and banking industry as a whole, Kumar said the bank will be able to contain its fresh slippages as well as its credit cost going ahead. “Every cloud has a silver lining,” Kumar said. The bank’s net interest income – the difference between interest earned and expended – rose 5% y-o-y to Rs 18,688 crore in the December quarter. Its domestic net interest margin — a key measure of profitability — stood at 2.61% in Q3, down 28 bps y-o-y.
Shares of SBI fell as much as 2.1% on the BSE in intra-day trade on Friday, but recovered to end at Rs 296.4, down 1.7%. So far in 2018, the SBI stock is up 4.2% against a 0.15% fall for the Sensex in the same period. The bank declared its results after the trading session ended on Friday. The lender’s capital adequacy ratio (CAR) fell 105 bps y-o-y and 88 bps sequentially to 12.68% in Q3. In Q4FY16, SBI had created a watch-list of accounts worth Rs 31,352 crore and expected 70% of it to slip into non-performing category in a worst-case scenario.
The watchlist had expanded to Rs 32,427 crore following the merger. The list stands at Rs 10,341 crore following fresh slippages in the December quarter. Recoveries in Q3 FY18 were at Rs 2,231 crore and the bank also upgraded loans worth Rs 2,211 crore from non-performing to standard. SBI reported loan growth of 2.52% y-o-y to Rs 19.24 lakh crore in Q3 FY18 and its total deposits grew 1.8% y-o-y to Rs 26.51 lakh crore in the same period. Its investments in corporate bonds increased 30% y-o-y to Rs 66,367 crore, while its investments in commercial papers rose 20% to Rs 54,775 crore.