SBI reports Rs 2,312 crore net profit in Q1, asset quality slips

The gross non-performing asset ratio fell to 7.53 per cent of total advances for the current quarter, as against 10.69 per cent in the year-ago quarter

State Bank of India (SBI) on Friday reported a net profit of Rs 2,312 crore for the June quarter, as against a loss of Rs 4,876 crore in the year-ago period. This was on the back of healthy credit growth in both the retail and corporate segments. However, the deterioration in asset quality surprised analysts.

The consensus estimate of analysts was for the lender to report a net profit of Rs 4,106 crore for the quarter.

“SBI reported results below estimates on both the asset quality and the profitability fronts," said ICICI Securities in a note. The asset quality "surprised negatively,” according to the brokerage. 

The gross non-performing asset (NPA) ratio fell to 7.53 per cent of total advances for the current quarter, as against 10.69 per cent in the year-ago quarter. In the March quarter, the gross NPA ratio was at 7.53 per cent. Gross NPA in absolute terms reduced to Rs 1.69 trillion from Rs 2.13 trillion in the year-ago quarter and Rs 1.73 trillion in the fourth quarter.

But, slippages for the current quarter were at Rs 16,212 crore, compared to Rs 9,984 crore in the year-ago quarter and Rs 7,505 crore in the fourth quarter. SBI Chairman Rajnish Kumar said in a post-results conference call the slippages were because of three reasons. 
 

One bank in the consortium could not do resolution with regards to one large account, this particular account, which is "regular in all aspects", had to be marked NPA in the books of that particular bank owing to the June 7 guidelines on resolution of stressed accounts. Being a consortium member, SBI had to mark this account NPA. The hit was a little over Rs 2,000 crore for the public sector bank. 

Besides, the lender saw a spike in NPAs in its agriculture portfolio due to one state still continuing with debt-waiver schemes. The bank witnessed a deterioration in the SME portfolio.

"Leaving these three factors… the asset quality is okay for the bank and largely in line with what we were expecting," said Kumar.

The SBI chairman guided that even as the slippages were 2.83 per cent (annualised) of its advances for now, the bank planned to bring it down to below 2 per cent by March 2020. 

"Making tall claims isn't in the nature of SBI. The picture looks alright," said Kumar.

The total stressed portfolio in the book is about Rs 27,000 crore. Kumar admitted that resolution through the insolvency route was taking time. There are two accounts that can improve the bank's financial position the moment they are resolved. 

"Every quarter I am looking towards the sky and God and asking will we get all those decisions and recover the amount. These are NCLT accounts. Every morning I pray to God," said Kumar.

The bank has 453 accounts admitted to the National Company Law Tribunal, with a fund-based exposure of Rs 1.14 trillion. The NPAs in these accounts stand at Rs 59,000 crore. The bank has provided 91 per cent in these accounts. 

"Three accounts are in an advanced stage of resolution, with expected recovery of about 62 per cent," said the bank in its presentation.

On a standalone basis, the bank's domestic credit grew 11.89 per cent year-on-year (YoY), mostly leaning on retail lending, which grew 18.68 per cent YoY. 

The bank's retail loan customers are different from other banks, said Kumar. The bank actively focuses on government employee and those who have better job security and regular income, he added. 

Operating profit grew 10.63 per cent YoY. Net interest income grew 5.23 per cent to Rs 22,939 crore.

Fee income grew only 4.03 per cent to 5,177 crore. 

Domestic net interest margin (NIM) rose to 3.01 per cent in the reporting quarter, compared to 2.95 per cent a year ago. In the fourth quarter also, NIM stood at 2.95 per cent.

Provision coverage ratio stood at 79.34 per cent, rising from 69.25 per cent as of June 2018.

Capital adequacy ratio was at 12.89 per cent, from 12.83 per cent a year ago. 

Total provisions for the quarter was at Rs 10,934 crore, as against Rs 16,849 crore in the year-ago period. Loan loss provision stood at Rs 11,648 crore for the quarter. 

The bank's stock fell 2.76 per cent to close at Rs 308.45 apiece on the BSE on Friday.