A massive improvement in asset quality and gains from stake sale in a subsidiary have helped State Bank on Friday report a near six-fold growth in consolidated net at Rs 3,375 crore for the three months to September period.
On a standalone basis, net income of the nation's largest lender that controls over a fifth of the system-wide credit and deposits, soared 212 percent to Rs 3,011 crore.
However, amidst a slowing economy, very few corporate are drawing down on sanctioned working capital limits, capping the loan growth to under-9 percent, forcing SBI to focus more on retail advances, which clipped at 19 percent and now constitute 60 percent of the book, chairman Rajnish Kumar told reporters in a conference call, adding once things turnaround, the share of corporate loan book will grow.
On asset quality, gross non-performing assets dipped to 7.19 percent of the Rs 22.48-lakh crore loan book, from 9.95 percent a year ago, which was also boosted by a halving of fresh slippages to Rs 8,000 crore.
Kumar said loan waivers have caused slippages to swell to Rs 16,000 crore earlier, and termed Rs 8,000-crore as the normal number, and also exuded confidence of keeping gross slippages under 2 percent.
"...we have reached a situation where our gross slippages, even in not-so-good circumstances, are not likely to exceed 2 percent," he said.
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SBI booked a Rs 3,500-crore profit from a stake sale in SBI Life, which was fully used to provide for two potential cases of stress that the bank is staring at, Kumar said, adding they have also aside Rs 2,600 crore for a power account where restructuring has failed, while Rs 900 crore will be utilised for a potential loss towards an exposure to a mortgage lender currently in stress.
Overall provisions for bad assets inched up to Rs 11,040 crore from Rs 10,184 crore, helping the bottomline.
Kumar said SBI has a Rs 7,000-crore exposure to DHFL, (which he did not name though) and expects the account to slip into NPA in Q3. The bank has already set aside 20 percent of its exposure as provision.
About the difficulties banks are facing due to their exposure to DHFL, including banks and mutual funds to reach an agreement on resolution, Kumar said SBI can has the capability to deal with any eventuality.
On the warnings of banks' exposure to NBFCs resulting in system-wide difficulties ahead, Kumar said many a time, the threats are "overstated" and that SBI has not faced issues on this segment barring one account.
Kumar said the bank has already classified its Rs 1,200-crore exposure to a power project as an NPA, but will have commit another Rs 2,600 crore to the same account to honour a letter of credit, but the bank has already made full provision this upcoming drawdown.
Kumar said a part of the Rs 16,822 crore stressed accounts, which are standard now, will slip into NPAs in the next two quarters, but stressed that the slippages will be within the Rs 32,000-crore range.
From an upcoming stress perspective, accounts over due for 30-89 days have come down to Rs 9,312 crore from Rs 10,289 crore in the June quarter.
The provision coverage ratio now stands at 81.23 percent, which is a 10 percentage points improvement over the year, and Kumar said this along with a strong capital base of 13.59 percent places the bank in good shape for the future.
The bank has written off Rs 12,000 crore of loans during the reporting quarter, down from Rs 16,000 crore in Q1, and as against Rs 58,000 crore in FY19, Kumar said, explaining that these items have been moved away from the balance sheet and cannot be called write-offs.
The bank has an exposure of Rs 35,000 crore to the telecom segment as of September, and Kumar said it is difficult to assess the impact of the Supreme Court judgement on average gross revenue issue, involving a payout of over Rs 92,000 crore to the government.
Core net interest income grew 17.67 percent to Rs 24,600 crore, aided by 0.42 percentage point widening in the net interest margin to 3.22 percent but was suppressed by low loan growth.
Kumar said only 32 percent of working capital limits are being utilised by corporates now but said the latest RBI data on credit growth indicates some reprieve and maintained the earlier credit growth guidance of 12-14 percent.
SBI is focusing on retail to grow the book, and has not yet faced any troubles from the auto sector he said.
From an earnings perspective, Kumar said the bank also maintains the pre-provisioning operating profit target of Rs 70,000 crore for FY20, having achieved Rs 31,445 crore in H1.
On network expansion, SBI has a target to have 600 new branches in FY20 as against 275 a year ago.
About shelving the SBI General Insurance IPO plans, he said valuation has to go up to Rs 50,000 crore before the bank can begin a share sale process, and admitted that such a possibility is remote this fiscal. But they will go ahead with IPO for its cards business in the March quarter, he added.
Analysts at domestic brokerage ICICI Securities called the results as "above estimates" with asset quality improvements being a positive surprise.
Cheering the numbers, investors snapped up SBI scrips, rallying 7.19 percent to Rs 281.60 on the BSE, as against a flat closing of the benchmark.