State Bank of India (SBI) on Friday reported a 34.6% slump in September quarter net profit as provisions against bad loans doubled from a year ago, showing the continuing pain from a pile-up of toxic assets at India’s largest lender.
The bank reported a net profit of Rs2,538.32 crore in the three months, down from Rs3,879.07 crore in the year-ago period. According to a Bloomberg poll of 17 analysts, the bank had been expected to post a net profit of Rs2,585.40 crore.
Provisions against bad loans jumped 99.64% to Rs7,669.66 crore in the quarter from Rs3,841.77 crore in the year-ago period. On a sequential basis, provisions were up 21% from the June quarter’s Rs6,339.56 crore. The provision coverage ratio fell to 62.16% from 70.48%.
SBI reported fresh slippages—or new bad loans—worth Rs 10,341 crore during the July-September period, higher than Rs 8,790 crore in the June quarter and Rs5,875 crore in the same quarter last year. Loan recoveries fell to Rs1,344 crore from Rs1,647 crore a year ago.
“Slippages worth Rs4,853 crore came from the watchlist, which is now at around Rs25,951 crore. We expect 75-80% slippages from the watchlist going ahead. The watchlist is expected to come down by Rs5,000-7,000 crore in the coming months,” said SBI chairperson Arundhati Bhattacharya.
Bhattacharya expects loan recovery to pick up later this year.
“Visibility of recovery is much greater about large value accounts compared to a quarter ago. Focus on recovery has not shifted and will not shift..,” she added.
Gross non-performing assets (NPAs) at SBI rose 4.18% to Rs1.05 trillion at the end of the September quarter from Rs1.01 trillion in the June quarter. On a year-on-year basis, gross NPAs jumped 86.13% from Rs56,834.28 crore.
As a percentage of total loans, gross NPAs stood at 7.14% at the end of the September quarter compared to 6.94% in the previous quarter and 4.15% in the year-ago quarter.
Net NPAs made up 4.19% of the loan book in the September quarter compared to 4.05% in the previous quarter and 2.14% in the same quarter last year.
Net interest income (NII), or the core income a bank earns from loans, rose marginally by 1.3% to Rs14,437.46 crore in the September quarter from Rs14,252.55 crore a year ago.
The domestic net interest margin, or the difference between the yield on advances and cost of funds, declined by 27 basis points year-on-year to 3.05% from 3.32%. One basis point is one-hundredth of a percentage point.
Non-interest income that includes fees and commissions increased 36% to Rs8,424.14 crore from Rs6,197.25 crore a year ago.
Capital adequacy ratio for the quarter stood at 13.94%, up from 12.17% a year ago.
Gross advances rose 8.11% year-on-year to Rs14.8 trillion as of 30 September. Of this, large corporate advances were at Rs3.1 trillion, up 10.17% from last year. Loans to mid-sized corporate entities were at Rs2.05 trillion at the end of the second quarter, barely changed from the same period last year. Retail loans rose 20.42% year-on-year to Rs3.5 trillion.
Deposits increased to Rs18.58 trillion as of 30 September, from Rs16.34 trillion a year ago.
“Loan growth is expected to remain slow. We will not look at growing in sectors where peripheral business is not there. Loan growth target will remain around 11-12% this year,” Bhattacharya said.
SBI has seen its debit card usage double in the last two days, following the demonetization of Rs1,000 and Rs500 bank notes, Bhattacharya said. Total money deposited since the bank’s branches opened on Thursday was about Rs39,667 crore, she said.
“On a single day (Thursday) savings deposits were up by Rs11,000 crore as compared to Rs8,000 crore a month,” Bhattacharya added.
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