SBI Q1 profit falls 20.4% to Rs2,005.5 crore, bad loans rise sharply
Mumbai: State Bank of India (SBI), India’s biggest lender by assets, reported a lower-than-expected quarterly net profit on Friday after setting aside more money to cover the risk of defaults on ballooning bad loans.
SBI merged five associate banks with itself effective 1 April so the Rs2,005.53 crore profit in the quarter ended June is not comparable with the year-ago number. Fourteen analysts polled by Bloomberg had forecast a profit of Rs2,955.90 crore. According to the like-to-like numbers provided by SBI (including last year’s numbers for the associates), the net profit was a five-fold jump from a year ago. The bank’s consolidated net profit, including that of its asset management and insurance arms, grew almost three times to Rs3,032 crore from Rs1,046 crore a year ago.
SBI had to set aside Rs12,228 crore in the quarter as cover against loan losses compared with Rs11,354 crore in the year-ago quarter.
SBI shares plunged 5.36% to Rs280.65 at the close of trading on a day the benchmark Sensex fell 1.01% to 31,213.59 points.
Bad loans at the bank increased primarily in the retail, small and medium enterprises and agriculture portfolios.
In the quarter, SBI reported fresh additions to gross non-performing assets (NPAs) of Rs26,249crore compared with Rs25,028 crore for the three months ended March. Of these slippages, around Rs8,360 crore was from the corporate book and around 95% of this came from the so-called watch list of stressed accounts. The list currently stands at Rs24,444 crore. A majority of the corporate slippage was from the accounts of one diversified conglomerate.
NPAs in the retail loan book rose to Rs7,632 crore as of the end of June from Rs3,717 crore three months earlier. Farm loan NPAs rose to Rs17,988 crore from Rs12,191 crore.
As of 30 June, gross NPAs were Rs1.88 trillion compared with Rs1.78 trillion (including the numbers for its subsidiaries) at the end of March. Gross and net NPA ratios were 9.97% and 5.97%, respectively.
“Asset quality continues to be a big problem and the credit cost guidance is still high. Another quarter may simply go in putting the house in order,” Suresh Ganapathy, an analyst at Macquarie Capital, said in a note to clients. He added that SBI’s profitability is expected to be under pressure because of provisioning.
Credit costs refer to the percentage of provisioning against total advances, and currently stands at 2.48% for SBI.
One reason for the increase in bad loans was that the non-corporate loan book of associate banks followed an internal classification standard that was different from SBI’s, chairman Arundhati Bhattacharya indicated.
The problem was compounded because some state governments announced farm loan waivers and also because the bank was unable to quicken the pace of retail loan recoveries as most of its workforce was busy in branch and staff alignment.
The management of the bank is hopeful of improvement in asset quality and expects the credit cost to fall to 2.25% by the end of this fiscal year.
In the farm loan book, the bank is expecting a payout of around Rs3,000 crore from state governments against farm loan waivers.
In the June quarter, net interest income (NII), or the core income a bank earns by giving loans, fell 3.5% from a year ago to Rs17,606.01 crore. As of 30 June, total advances rose 5.2% year-on-year to Rs19.89 trillion. Deposits rose 13.3% to Rs26.03 trillion.