Street cheers for SBI despite dip in Q4 net

SBI chief Arundhati Bhattacharya doesn't see any extraordinary pressure on NIM

The State Bank of India stock closed six per cent higher despite the country’s largest lender reporting a 66 per cent drop in net profit to Rs 1,264 crore in the March quarter. The scrip closed at Rs 195 on the BSE.

Ravi Shenoy, vice-president, Motilal Oswal Securities, said the bank had a watch list of only 1 per cent of loans and this brought relief to the markets.

SBI’s bottom line is under pressure over a sharp rise in provisions for bad loans. The provisions for non-performing assets (NPAs) grew to Rs 12,139 crore during the quarter from Rs 4,985 crore in the same quarter a year ago. Sequentially, too, it was up almost 59 per cent. The provision coverage ratio for bad loans stood at 60.69 per cent at the end of FY16, much lower than 65.23 per cent at the end of the December 2015 quarter.

SBI had posted a net profit of Rs 3,742 crore in January-March 2015. For 2015-16, its net profit was Rs 9,950 crore against a net profit of Rs 13,101 crore in 2014-15.

Its net interest income rose by 3.9 per cent from Rs 14,712 crore in the fourth quarter of 2014-15 to Rs 15,291 crore in the same period a year later. The net interest margin fell to 2.96 per cent in March 2016 from 3.16 per cent in March 2015 (The cut in lending rates made a dent in SBI’s interest income in 2015-16.

SBI Chairperson Arundhati Bhattacharya said, “I don’t see any extraordinary pressure on the NIM. However, this is a falling rate scenario and an  accommodative cycle.”

If there is a rate cut, there is a pressure to bring down the interest rate. There could be some impact on the NIM.”

Non-interest income expanded by 25.61 per cent to Rs 10,696 crore during the quarter from Rs 8,515 crore in the same period a year ago driven by growth in recovery from written-off accounts and fees.

Besides normal provisions, the bank has set aside money for other weak accounts to address possible future requirements. SBI holds Rs 3,383 crore as an additional corpus over and above what has been provided for NPAs.

Its gross NPAs rose to Rs 98,172 crore (6.5 per cent) at the end of March 2016 from Rs 56,725 crore (4.25 per cent) at the end of March 2015.

Bad loans yet to be provided for stood at Rs 55,807 crore (3.8 per cent) in March 2016, up from Rs 27,590 crore (2.12 per cent) a year ago.

SBI has kept loans, mostly corporate credit, worth Rs 31,000 crore on watch. These include loans where the interest or principal has remained due for 60-90 days.

Deposits grew by 9.8 per cent from Rs 15,76,793 crore in March 2015 to Rs 17,30,722 crore in March 2016. The share of low-cost deposits (current and savings accounts) improved from 42.88 per cent in March 15 to 43.84 per cent in March 16. Gross advances rose by 13.04 per cent from Rs 13,35,424 crore in March 15 to Rs 15,09,500 crore in March 2016.

SBI’s average cost of deposits declined to 6.22 per cent in March 2016 from 6.39 per cent in March 2015 and the average yield on advances declined to 10 per cent in March 2016 from 10.55 per cent in March 2015.

The capital adequacy ratio improved to 13.12 per cent in March 2016 from 12 per cent in March 2015. The divestment of non-core investments and in subsidiaries could add more than Rs 3,000 crore. Also, revaluation of real estate could add more than Rs 10,000 crore to the common equity Tier 1, the bank said.