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The bank reported growth of 30.2 per cent in net profit at Rs 2,910 crore, compared with Rs 2,234 crore in the year-ago period. The rise in profit was aided by treasury gains and came despite tepid loan growth. The profit, however, was below a Bloomberg estimate of Rs 3,326 crore, primarily due to higher provisions — the bank increased its provision coverage ratio to 63.56 per cent from 58.32 per cent a year ago.
Net interest income grew 9.2 per cent, owing to 6.9 per cent annual growth in loans, while trading gains from treasury operations stood at Rs 920 crore, up 286 per cent, due to favourable bond yields.
The bank’s gross and net non-performing assets (NPAs) rose marginally on a sequential basis, but fell sharply compared to the year-ago period. Most PSBs, including Bank of Baroda, Punjab National Bank and Bank of India, reported higher bad loans for the third quarter.
“There is no magic wand; we are doing a lot of hard work. We have done a lot of follow-up (with borrowers),” SBI Chairman Arundhati Bhattacharya said at a post-earning interaction with journalists.
In the past year, the bank has cut its gross NPAs by Rs 6,000 crore to Rs 61,991 crore.
When Bhattacharya took charge at the helm in October 2012, the bank was plagued with slippages in the small and medium enterprise (SME) segment. Since then, the lender has been cautious in lending to the sector.
“With respect to SMEs, we have consolidated and changed our entire product suite; all the products we have brought in are risk-mitigated ones. Frankly, I thought this was the right time to consolidate. So, we have held back and did not go out aggressively,” Bhattacharya said.
SBI, 17 per cent of whose exposure is to the SME segment, has roped in Boston Consulting Group, to assist in altering products and processes in this regard and foresees growth in this segment after two quarters.
The bank was able to restrict fresh slippages to Rs 7,043 crore, while standard asset restructuring stood at Rs 4,092 crore.
“Fresh impairment came as a positive surprise. Even headline NPL (non-performing loans) has remained stable at 4.9 per cent, positive in our view,” said Saday Sinha, an analyst with Kotak Securities.
SBI estimates a restructuring pipeline of Rs 5,500 crore in the March quarter, after taking into account the fact the regulatory forbearance for banks in terms of lower provisioning will be done away with on April 1, 2015.
“The ballpark figure of restructuring pipeline is Rs 5,000-5,500 crore. It is a little on the higher side. I’m giving a higher number because we do not know what will happen during this quarter. As you know, when you have a particular window closing, there is a little bit of rush,” Bhattacharya said.
This quarter, the bank is putting bad loans worth Rs 1,200 crore — primarily in the home and SME segment — on the block. “We will have a mega auction on March 14 and 300 pieces of assets will be put on auction. Of these, 100 will be (in the) residential (category),” the chairman said.
The bank’s profitability was also aided by tight control on costs, with operating expenses rising only 5.51 per cent. At 3.5 per cent, the net interest margin was stable, owing to a steady cost of funds and yield on advances.
SBI said its strategy of lower appetite for risks amid a slowing economy and high interest rates would be reflected in future numbers. “We are confident we will be able to hold the book. Going forward, as we are getting more and more risk-mitigated products in our books and a much better monitoring system, we hope to show better number ahead,” Bhattacharya said.
However, when asked if the bank had left the worst behind, she said, “I hope so, but let’s wait for a quarter or two before it is surely the case.”
