Lower provisions and higher interest income helped State Bank return to the black during the first quarter ending June with a net income of Rs 2,312 crore as against a net loss of Rs 4,876 crore a year ago.
The largest lender said its provision plunged a full 35 percent to Rs 10,934 crore for the reporting period from Rs 16,849 crore, helping the bottomline.
A further boost came from higher net interest income which grew 5.23 percent to Rs 22,939 crore from Rs 21,798 crore. This was on the back of a marginal increase in domestic net interest margin to 3.01 percent from 2.95 percent.
Overall asset quality improved massively boosted by a dip in both the gross non-performing loan ratio to 7.53 from 9.95 as well as the net NPA ratio to 3.07 from 4.84 percent.
Despite a good numbers, the street did not take the numbers positively, primarily due to higher slippages. The SBI counter lost nearly 3 percent at Rs 308.45 on the BSE after the result announcement against a gain of 0.3 percent gain on the benchmark.
"This is the fourth consecutive quarter profitable growth for us. It is building up gradually. If we analyse the numbers, the overhead and staff cost is under control and also there is a decline in the cost-to-income ratio at 2.03 percent, down 52 bps annualized," chairman Rajnish Kumar told reporters on a concall Friday.
He said the bank has been focusing on pre-provision operating profit and has been successful so far as operating profit grew 10.60 percent to Rs 13,246 crore.
"In the current scenario where credit growth is muted, I think it will be very difficult for us to push up the NIM in a very significant manner. We expect domestic NIM to be at 3.1 percent in FY20," Kumar said, adding he expects to close the fiscal with a 12 percent growth in loan sales.
The provision coverage ratio stood at 79.34 percent.
However, the bank could not contain fresh slippages during the quarter which rose to Rs 16,212 crore. Explaining the reason for the same, Kumar said in respect of one account worth Rs 2,000 crore, owned by a Maharatna, which is regular in all respects, but because of a lender who could not implement the resolution plan under the Feb 12 RBI circular, the account became NPA in that bank and therefore others had to classify it as an NPA.
"Another reason contributing to higher slippages is the agriculture sector, thanks to the debt waiver announced by Maharashtra where incremental gross slippages rose to Rs 2,000 crore. Also, some accounts from SME segment also slipped into NPAs," he said.
Recovery and upgrades stood at Rs 5,769 crore and the bank expects better days on this as it is hopeful of three NCLT accounts nearing completion---Essar, Bhushan Steel &Power and Alok Industries. "Nearly, Rs 16,000 crore can come from these three accounts," he said.
"Every quarter I am looking towards the sky and the god and asking will we get all those decisions and recover the amount. These are NCLT accounts. Every morning I pray to god...." Kumar said.
On the troubles in the auto sector, Kumar said there is no concentration risks in the sector.
Managing director PK Gupta chipped in saying "we had taken some action sometime in February and Marchthere have been no increase in our exposure and there have been no increase NPAs. Even SMA accounts are at comfortable levels".
Kumar was quick to add that bank is very supportive of the auto sector. "We are not panicking because in these circumstances it does not help that you squeeze everything. The dealership financing is self-liquidating in nature and if there is some built up in inventory we are open."
The bank has an exposure of Rs 11,500 crore to auto dealers, while total retail auto loan book is Rs 71,000 crore.
Kumar said the bank is looking to raise Rs 7,000 crore in additional tier I bonds this year and is also planning another Rs 20,000 crore in equity capital, but that will take time. "We will wait for better market sentiment for this."
The chairman also said the bank will move ahead with SBI Card IPO in Q4 while the same for the general insurance arm will take place only next year.
Domestic credit grew 11.89 percent driven by both retail loans of which personal loans grew 18.68 percent as well as high rated corporate loans which grew 11.62 percent.
The bank's capital adequacy ratio improved from 12.83 in June 2018 to 12.89 in June 2019, while the cost to income ratio (excluding pension provisions) improved from 52.46 to 47.26.
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