However, the bank clarified that the results for Q1 FY18 included operations of the erstwhile banking subsidiaries and Bharatiya Mahila Bank (BMB), and the results are not comparable with June 2016 quarter numbers.
The bank said that the net profit would go up by 436 per cent from Rs 374 crore to Rs 2,006 crore if the June 2016 numbers were to include the erstwhile subsidiary banks and BMB.
Asset quality of the retail loan book came under pressure in April-June, as advances worth Rs 17,886 crore in this segment slipped into the category of non-performing assets (NPAs). People held back repayment in anticipation of farm loan waiver, constraining follow-up for recoveries during transition for the merged entity and the end of forbearance on loans after demonetisation, chairman Arundhathi Bhattacharya said in a conference call with the media.
Reflecting market apprehension about retail loan quality, the stock closed at Rs 280, down 5.3 per cent over Thursday's close on the BSE; it was the biggest loser among Sensex stocks. Net interest income, the difference between interest earned and expenses, decreased by 3.5 per cent over a year before, to Rs 17,606 crore.
The net interest margin (NIM) dipped from 2.84 per cent a year before to 2.36 per cent. This reflects the effect of reduction in the Base Rate/Marginal Cost of Funds-based Lending Rate during the period. The SBI chief said NIM would improve by 10-15 basis points, on improved recoveries and upgrades. Also, pick-up in loan growth will give higher yield vis-à-vis investments.
Non-interest income was down by 8.6 per cent from Q1 of FY17, to Rs 8,006 crore in Q1FY18. But, the fee income, part of other income, increased from Rs 4,190 crore to Rs 4,870 crore, year-on-year growth of 16.2 per cent. Total provisioning declined by 26.3 per cent to Rs 9,869 crore, from Rs 13,388 crore in April-June 2016, helping to post a tidy rise in net profit. Gross NPAs rose to Rs 188,066 crore (9.97 per cent) in end-June from Rs 137,662 crore (7.4 per cent) in June 2016 for the merged entity.
The provisions for bad loans rose by 11.3 per cent year-on-year to Rs 12,215 crore. The provision coverage ratio was 60.8 per cent in end-June, from 59.9 per cent a year before, SBI said. SBI's total of dues from the 12 big bad loan accounts referred for the insolvency and resolution process by Reserve Bank of India (RBI) order for all banks is Rs 50,247 crore. The total provision held is Rs 19,943 crore. The incremental provision required on these accounts is Rs 8,571 crore in FY18, based on RBI guidelines.
These being old NPAs, the ageing related provision on these accounts would have been Rs 5,034 crore in FY18. The uncertainty is only for an additional Rs 3,500 crore. The exact provision we will have to make depends on resolution of the accounts, and the bank will be in a position to absorb this liability, Bhattacharya said.
Gross advances grew 1.5 per cent to Rs 18,86,666 crore at end-June. SBI expects loan demand to pick up in the third and fourth quarters; its expectation is six to eight per cent growth in FY18.
Deposits rose by 13.3 per cent to Rs 26,02,534 crore. The share of low cost current account and savings bank deposits was Rs 11,13,455 crore. The chairman said they were not contemplating a cut in deposit or lending rates at this point. The capital adequacy ratio was 13.31 per cent, with tier-I capital at 10.67 per cent at end-June.