The nation's largest lender State Bank of India today reported a near threefold jump in consolidated net profit at Rs 3,032 crore for April-June despite a massive spike in bad loans and deterioration in all other key metrics.
The bank said the numbers are not comparable as it is the first quarterly earnings after the bank merged its five associate banks - State Bank of Bikaner & Jaipur, State Bank of Hyderabad, State Bank of Mysore, State Bank of Patiala, State Bank of Travancore - and the Bharatiya Mahila Bank with itself from April 1, 2017.
On a standalone basis, net grew a full 436 per cent to Rs 2,006 crore helped by lower provisioning for bad loans. The bank had reported a net standalone profit of Rs 374 crore a year ago while consolidated profit was Rs 1,046 crore.
Despite a massive spike in NPAs, total provisions fell 26.3 per cent to Rs 9,869 crore from Rs 13,388 crore a year but loan loss provision rose to Rs 12,125 crore, up 7.62 per cent from Rs 11,266 crore while standard asset provisioning was down Rs 2,039 crore.
Gross NPA rose to 9.97 per cent from 7.40 per cent and net NPA jumped to 5.97 per cent from 4.36 per cent. NPA in the retail sector grew 1.56 per cent to Rs 7,632 crore, while in the agri book, it grew 9.51 per cent to Rs 17,988 crore.
Explaining the numbers, CFO Anshula Kant said the bank has been making "some proactive provisioning for stressed standard accounts and as those accounts became NPAs, it used that provisions for loan loss provisions.
"So to that extent we got some upside in terms of containing loan loss provisions and standard asset provisions have come down. We also got a mark-to-market gain on investment depreciation of Rs 755 crore. These are the things that have helped us to improve our net profit," she said.
Chairman Arundhati Bhattacharya chipped in saying the provisions are less because some of the fresh slippages came in from the retail book and also because of the higher provisions the associate banks made in the run-up to the merger.
"When we got the merger notification on May 17, we started aligning the corporate books of the associates. So what we have done over three years in the associate banks' corporate books, we had to do it in one year. This resulted in associates making huge provisions hitting their numbers, thereby also impacting the numbers of the merged entity.
"In the June quarter, the corporate book has already more or less been taken care of. The slippages that has come because of retail piece, we haven't seen that kind of requirement for doing that amount of provisioning in this quarter. So that's why the consolidated numbers look better," Bhattacharya told reporters in a concall.
Net interest margin declined to 2.50 per cent from 3.04 per cent. But the chairman talked up the numbers saying "we believe going forward the NIM will definitely be able to show some kind of a increase".
Analysts at HDFC Securities termed the numbers as "disappointing" as despite the massive clean-up last year, the bank has red inks all across with elevated slippages.
The only comfort from the numbers is the 25 per cent drop in the watchlist to Rs 24,444 crore as this is the "lowest amongst peers", it said.
While the bad loan ratios jumped so did the recoveries which rose to Rs 4,646 crore while the bank upgraded Rs 2,034 crore of loans.
The bank saw Rs 26,249 crore of loans turning NPAs in the quarter. Total slippages from corporate sector stood at Rs 8,363 crore and the chairman said 95 per cent or Rs 7,976 crore of this came in from the Rs 24,444-crore watch list.
The slippage ratio stood at 5.38 per cent in the quarter and the management expects this to improve to 3.3 per cent for the full year.
On April 1, post-merger watch list was Rs 32,427 crore which now came down to Rs 24,444 crore. The bank sold Rs 20 crore of NPAs to asset reconstruction companies.
The bank has moved 12 stressed accounts to NCLT, including six from the RBI list. Total outstandings in the 12 accounts is Rs 50,247 crore and the bank currently holds a provision of Rs 19,943 crore on these accounts.
The bank will have to make an incremental provision of Rs 8,571 crore on these accounts in the current fiscal. But for RBI guidelines the ageing related provision on these accounts would have been at Rs 5,034 crore for FY18.
Deposits rose 13.28 per cent to Rs 26.04 trillion and gross advances rose 1.46 per cent to Rs 18,86,666 crore.
SBI expects 6-8 per cent credit growth in FY18, likely to be driven by retail,SMEs, agri and select corporate sectors.
The bank raised Rs 15,000 crore through a QIP in the quarter and Bhattacharya said she may not ask capital from the government in this fiscal.
The bank's scrip plunged 5.36 per cent to Rs 280.65 on the BSE which shed over 1 per cent.