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The country’s biggest lender, State Bank of India (SBI), reported a 23 per cent increase in net profit to Rs 3,742 crore in the March quarter, fourth and final one (Q4) of 2014-15, higher than what the Street had estimated.
There was a four-fold increase in treasury gains, coupled with less of slippage to the bad loans category. Lower slippages also helped improve the net interest income by 14 per cent from the corresponding period a year before, to Rs 14,711 crore, despite a tepid 7.25 per cent growth in loans.
Improved asset quality led the scrip to surge five per cent soon after the results were announced but it later closed at Rs 282.45 or 2.4 per cent lower than the previous close, on profit booking.
The net interest margin (NIM) for the quarter was 3.54 per cent as compared to 3.49 per cent during the corresponding period of last year. The bank expects to hold NIM at 3.5 per cent.
Lower fresh slippages — Rs 4,769 crore against Rs 7,987 crore during the corresponding period of last year — and robust recovery helped the ratio of gross non-performing assets (NPAs) to decline to 4.25 per cent, against 4.95 per cent at the end of the March quarter of FY14. The ratio was 4.9 per cent at the end of the December quarter. During financial year 2014-15, gross NPAs came down by Rs 4,880 crore, to close the year at Rs 56,725 crore. Net NPAs reduced to 2.1 per cent of the total, against 2.57 per cent at the end of FY14. There was a recovery of Rs 4,485 crore in the quarter, against Rs 3,389 crore in Q4 of FY14.
Bank Chairman Arundhati Bhattacharya said non-performing loans had come down but the provision coverage ratio (PCR) had also improved, driving home the point that the bank was not showing profit at the cost of provisioning.
“We have seen the stress in assets lessening, as both GNPA and NPA have come down. At the same time, the PCR has gone up by 557 basis points. We had the provision for a counter-cyclic provision of Rs 1,100 crore, which we did not avail,” she said. The PCR at end-March was 69.13 per cent, as against 62.86 per cent a year before.
Non-interest income grew 29.3 per cent in Q4, mainly aided by a 300 per cent rise in profit from sale in investments, Rs 1,659 crore against Rs 401 crore in the same period last year.
“We had a write-off (of) Rs 4,874 crore in the last quarter, mainly on account of sale of two-three large loans to asset reconstruction companies (ARCs),” she said.
She welcomed the banking regulator’s decision to allow banks to amortise their losses over two years for NPA sale to ARCs. Bhattacharya highlighted the loan recovery efforts, of Rs 100 crore from each of five circles (SBI has 14 circles).
The bank will also hold a mega auction of assets on June 12, and in the last week of May, a ‘resolution week’ for resolving issues with non-wilful defaulters.
With the central bank closing the dispensation benefit given to standard restructured assets, SBI, like many other state-run lenders, saw a sharp rise in such activities. The bank restructured Rs 11,800 crore in the quarter. It has a further restructuring pipeline of Rs 2,625 crore, which it must complete by end-June.
Total write-offs in Q4 were Rs 4,874 crore, against Rs 5,698 crore in the same period last year. However, upgradation in the quarter was much less at Rs 676 crore, against Rs 5,054 crore in the same period last year.
The management said loan growth would improve this financial year. “It has started picking up. It should further pick up in the next two months,” said Bhattacharya. The bank expects loan growth of nearly 14 per cent by the end of 2015-16.
Power, construction and iron & steel continued to remained areas of concern due to high NPAs, she said. “We see that of the total iron and steel demand of 21 million tonnes, nearly 12 mt is getting imported, and we believe dumping is going on from countries like China, Russia and Ukraine. That is an area of concern,” she said.
