Rajnish Kumar, SBI Chairman (Mint )
Rajnish Kumar, SBI Chairman (Mint )

SBI Q4 results miss estimates on higher provisions to reduce debt

  • Provisions against bad loans in Jan-Mar surged 24% to 17,335.84 cr from 13,970.82 cr a quarter ago
  • The lender said that it has made 90% provisions against all NCLT cases to avoid any future shocks

MUMBAI : The State Bank of India has posted a profit of 838.40 crore for the fourth quarter, missing analysts’ estimates after making hefty provisions to pare bad debt. In the corresponding quarter last year, the bank had posted losses of 7,718.17 crore.

A Bloomberg survey of analysts had estimated a profit of 4,840.80 crore in the quarter, but provisions against bad loans surged 24% to 17,335.84 crore in the January-March period from 13,970.82 crore a quarter ago.

Provision coverage ratio, the amount set aside to cover non-performing assets, stood at 78.73%, compared with 66% during the same quarter last year.

The lender said that it has made 90% provisions against all National Company Law Tribunal, or NCLT, cases to avoid any future shocks.

“For three major accounts—Essar Steel, Bhushan Power and Steel and Alok Industries—that are in very advanced stages of restoration, we have made 100% provision. As a result, almost 16,000 crore is what is recoverable as soon as the judicial process is over. This shows the strength of our balance sheet," said Rajnish Kumar, chairman, SBI.

The bank’s asset quality improved during the quarter with additions of bad loans falling sharply. The bank classified its exposure worth 1,125 crore out of 3,487 crore towards Infrastructure Leasing and Financial Services (IL&FS) as a non-performing asset (NPA) in this quarter.

The lender said it has done 50% provisioning on all the holding companies. It classified a 1,200 crore exposure to Jet Airways as an NPA.

As a percentage of total loans, gross NPAs stood at 7.53%, compared with 8.71% in the previous three months, and 10.91% in the year-ago quarter.

Net NPAs were at 3.01% in the March quarter against 3.95% in the previous quarter, and 5.73% in the corresponding quarter of last year.

“Profits, which the bank earned during the year, rather than going for any temptation to declare higher net profit, the bank has spared all that money to provide. We have not left anything for future. Now whatever happens, the remaining legacy credit cost will be done by March 2020. From 1 April, 2020, there will be no legacy cost as far as corporate is concerned," Kumar added.

Net interest income (NII), or the difference between interest earned on loans and paid on deposits, was up 15% from 19,974.28 crore in the year-ago period to 22,953.83 crore in the three months ended 31 March. Non-interest income was at 12,685.12 crore, compared with 12,494.78 crore during the period under consideration.

Deposits rose 7.58% to 29.11 trillion, while advances increased 13% to 21.86 trillion.

The bank said that it is looking to list two of its subsidiaries–SBI Card and SBI General–in the current fiscal year.

“SBI’s March quarter results validates our view that the worst in terms of asset quality stress is behind for the bank. SBI opted to go for a clean-up (and thereby strengthening) of the balance sheet this Q4 and, thus, the trend of declining incremental slippages ratio, improving PCR are further positives, and explain the higher-than-expected provisions cost. Also, the lender’s up-fronting of provisions for several individual large exposures, helps improve the medium term comfort factors for investors further," said Lalitabh Shrivastawa, an analyst at Sharekhan by BNP Paribas. SBI gained 2.94% to close at 308.05 per share on Friday on BSE, while the benchmark index, Sensex lost 0.26% to close at 37,462.99 points.

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