Five takeaways from SBI Q2 results

Provisioning for bad loans rise but fresh slippages on the decline

I ndia’s largest bank, State Bank of India has posted a profit of Rs 3,100 crore for September 2014 quarter, in line with market expectations. As compared to the same quarter last year, the bank has posted a 30.5 per cent growth in profit. For the June 2014 quarter, SBI had posted a profit of Rs 3,349 crore. 

 

Following are the five key takeaways from the company’s September 2014 quarter numbers

 

1) Provisioning for bad loans has increased to Rs 4,274.98 crore signifying continued strain in the bank’s assets. In September 2013, the bank provided for Rs 3028.74 crore while in June 2014 provisions were at Rs 3496.73 crore.

 

2) Gross NPAs for the quarter stood at 4.89 per cent as compared to 4.9 per cent in the previous quarter and 5.64 per cent in September 2013. Net NPAs in September 2014 stood at 2.73 per cent while it was 2.66 per cent in June 2014 and 2.91 per cent in September 2013. Bank’s effort in recovery and a stringent policy towards defaulters seems to be working as is reflected in upgrades which stood at Rs 2635 crore during the quarter as against Rs 1362 crore in the previous quarter.

 

3) Importantly fresh slippages have also fallen along with the NPAs. Slippages stood at Rs 7,700 crore as against Rs 9,932 crore in the previous quarter. Similarly, there is a decline in write-offs too. The bank wrote of Rs 4,787 crore in September 2014 as compared to Rs 6,556 crore in the previous quarter.

 

4) As has been the trend with most of the banks, SBI too has derived bulk of its profit from the retail segment. The retail segment alone contributed Rs 3210 crore to the total segment profit of Rs 5103 crore. Retail segment got a boost from higher growth in home loans which picked up to 14.2 per cent while auto loans were only 5 per cent. In September 2014, the bank booked treasury profit of Rs 895 crore as against Rs 17.6 crore in the same quarter last year. Profits from corporate segment however fell to Rs 917 crore as against Rs 1296 crore last year.

 

5) Rising cost of deposits have affected the bank’s NIM (net interest margin) which stood at 3.49 per cent as compared to 3.54. However, international NIM improved from 1.08 per cent to 1.20 per cent. Speaking to the media, the SBI management has cautioned that asset quality improvement will be gradual and not sharp as expected by certain quarters of the market.