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“The pressure on asset quality continued, though in terms of new assets falling into sub-standard category perhaps got arrested (during the quarter). But the provisioning requirements increased substantially. Our results have been a mixed bag but we have tried to protect the equity holders’ interest,” Pratip Chaudhuri, chairman, said in his post-earnings comments.
Net Interest Income, or the difference between interest income and interest expense, declined 4.4 per cent from a year ago to Rs 11,078 crore during the quarter. Net Interest Margin was at 3.34 per cent at the end of March 2013, compared to 3.85 per cent a year ago. The bank’s domestic Net Interest Margin fell 51 basis points to 3.66 per cent, while international margin narrowed 17 basis points to 1.50 per cent.
“In domestic offices, the large part of margin compression is due to accounting for pension. In the previous year, pension money was treated as interest-free and the money was deployed in lending operations, giving the bank a higher Net Interest Margin. This year, we have moved the pension money into the pension fund. The fund has its own economics and investment return (expectations), and the fund did not participate in the net interest margin of the bank,” Chaudhuri said. He expects the bank to maintain its domestic net interest margin at 3.6 per cent in the current financial year.
SBI’s operating expenses were up 20.3 per cent year-on-year during the fourth quarter, due to 18 per cent rise in staff cost and 24 per cent increase in overhead expenses. The cost-to-income ratio deteriorated to 48.5 per cent at the end of March from 45.2 per cent a year earlier. The year-on-year growth in non-interest income was only 3.2 per cent during the quarter as fee income declined from a year earlier.
“The loan processing charge did not show any increase due to stagnant market conditions. The rates have been lower in government business. Our commissions from letter of credit and bank guarantee business were lower. We felt we were selling the bank cheap in the non-fund business. We are in the process of reviving this business significantly,” Chaudhuri said.
The bank has also overhauled its equity portfolio, which now comprises only Nifty stocks.
Loan loss provisions increased by 40 per cent to Rs 3,974 crore, as asset quality continued to deteriorate. The gross non-performing asset ratio increased by 31 basis points to 4.75 per cent, while net bad loan ratio deteriorated by 28 basis points to 2.10 per cent.
The bank restructured Rs 8,000 crore loans during the quarter, including Rs 1,600 crore advances to Suzlon and Rs 1,090 crore loans to Sasan Power. The restructured loan pipeline is Rs 5,000-6,000 crore, senior executives said. The provision coverage ratio was 66.6 per cent at the end of March 2013.
Gross advances increased by 20.7 per cent to Rs 1,078,557 crore, driven 40.3 per cent rise in large corporate advances. Retail loan growth during the year was 15 per cent.
Deposits were up 15.2 per cent at Rs 1,202,740 crore.
The share of low-cost current account savings account deposits was 46.5 per cent. Chaudhuri said the bank would aim for 20-25 per cent growth in deposits and advances in 2013-14. SBI closed the last financial year with a capital adequacy ratio of 12.92 per cent.
