State Bank of India posts loss in Q3, asset quality weakens

Country's largest lender State Bank ofIndia has posted net loss of Rs 2,416.4 crore for quarter ended December 2017, hit by sharp spike in provisions with weak asset quality.

The bank had reported profit at Rs 1,820 crore for year-ago quarter.

"Net loss was due to lower trading income due to hardening of bond yields, higher corporate slippages leading to higher loan loss provisions and significant investment depreciation hit," the bank said.

Net interest income, the difference between interest earned and interest expended, grew by 5.17 percent to Rs 18,687.52 crore compared to last year, with muted loan growth of 2.52 percent at Rs 19.24 lakh crore YoY. Retail loan growth in Q3 was 13.59 percent and agri 5.88 percent YoY, but corporate credit growth was lower by 4.22 percent YoY at Rs 9.09 lakh crore, SBI said.

The bank also reported muted deposit growth of 1.86 percent at Rs 26.51 lakh crore YoY due to base effect on account of demonetisation, with CASA deposits growing 1.18 percent and retail 7.05 percent.Net interest margin improved by 2 basis points to 2.45 percent for December quarter, but contracted by 26 bps year-on-year.

Asset quality worsened further on sequential basis. Gross non-performing assets (as a percentage of gross advances) were higher at 10.35 percent compared to 9.83 percent in previous quarter and net NPAs at 5.61 percent in December quarter were higher compared to 5.43 percent in September quarter.

In absolute terms, gross NPAs increased by 7 percent sequentially to Rs 1,99,141.34 crore and net NPAs rose by 4.6 percent to Rs 1,02,370.12 crore.

Provisions for bad loans for the quarter ended December 2017 stood at Rs 17,759.72 crore, which shot up 145 percent compared to year-ago and increased 6.2 percent over September quarter.

"Slippage ratio for 9-month period was lower from year ago level and we aim to contain fresh slippages within 2 percent in FY19," Rajnish Kumar, Chairman, SBI said while addressing press conference.

Fresh slippages in Q3 were at Rs 25,836 crore, including corporate slippages of Rs 21,823 crore and watchlist at the end of quarter stood at Rs 10,834 crore, he added.

"We have provided almost 60 percent for National Company Law Tribunal (NCLT) cases," he said, adding provisioning on market-to-market losses for bonds was Rs 3,400 crore.Cleaning of balance sheet is almost looked like complete, with taking provision coverage ratio to 65.92 percent, Rakesh Tarway of Reliance Securities said.

Impact of provisions and treasury loss was on expected lines, he added. Numbers missed analyst expectations, but considering expected high provisions on addition subsidiaries and treasury loss, numbers are in line, experts said. A CNBC-TV18 poll estimated profit at Rs 2,507.6 crore and net interest income at Rs 19,088.7 crore for the quarter.

"These are difficult numbers to digest due to subsidiary addition and the divergence for the bank like SBI was in line, so numbers are in line," Sanjiv Bhasin of IIFL. Gross NPA divergence was at Rs 23,239 crore and net NPA divergence at Rs 17,518 crore March 2017, with provision divergence at Rs 5,721 crore, Rajnish said.

Adjusted profit for financial year 2016-17 stood at Rs 6,743 crore against Rs 10,484 crore reported earlier. Other income (non-interest income) during the quarter declined 16.3 percent year-on-year to Rs 8,084.2 crore on lower trading income due hardening of bond yield. Operating profit in Q3 fell by 6.3 percent to Rs 11,754.6 crore compared to year-ago.