India’s largest lender State Bank of India (SBI) on Friday said net profit in the January-March quarter fell 66% from a year ago, due to higher provisions against rising bad loans. This is the bank’s sharpest fall in net profit since March 2011, when it fell 99%.
SBI shares rose 6.42% to Rs.195.55 apiece on BSE, while the Sensex rose 1.09%, or 286.92 points, at 26,653.60.
The state-owned lender reported a net profit of Rs.1,263.81 crore, down from Rs.3,742 crore a year ago. SBI’s net interest income (NII), or the difference between interest earned on loans and that spent on deposits, increased 4% from last year to Rs.15,291 crore during the period.
Other income during the January-March period rose 25.6% to Rs.10,695.6 crore.
Gross non-performing asset (NPA) ratio for the fourth quarter was reported at 6.5%, higher than 5.1% reported in the October-December period and 4.25% reported a year ago. As an absolute number, gross NPAs rose 35% quarter-on-quarter to Rs.98,173 crore.
The Reserve Bank of India (RBI) which conducted an asset quality review (AQR) in December had asked banks to provide against stressed accounts over the six months between October 2015 and March 2016. Following this, most public sector banks and even some private lenders posted a sharp drop in their quarterly profits and a rise in provisions. With this quarter’s results, banks have completed the increased provisioning as required by the regulator.
Total provisions during the fourth quarter increased toRs.13,174 crore, up 90% on a year-on-year basis. In the October-December period, the bank had provided Rs.7,949 crore. Of the total provisions, those against bad loans increased to Rs.12,139 crore in the January-March period as compared with Rs.4,986 crore a year ago.
Net NPA ratio during the quarter was 3.81%, against 2.89% in the preceding quarter and 2.12% last year.
In the notes to its profit and loss account, SBI said that the bank dipped into its counter-cyclical buffer to the extent ofRs.1,149 crore towards providing for NPAs. In March 2015, the RBI had allowed banks to use up to 50% of their counter cyclical provisions to set aside money for bad loans. Counter-cyclical provisions are those made during good times by lenders to be used during economic slowdown or a surge in bad loans such as the present time.
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