SBI Q2 net down 35% at Rs 2,538 cr on high NPA provisions

Bank raises forecast for deposit growth; provisions for bad loans almost doubled from a year earlier to Rs 767 cr

State Bank of India’s (SBI) bottom line came under pressure in the second quarter ended September 2016 on a sharp rise in provisions for bad loans and lower interest income.

The country’s largest lender reported a 34.6% fall in its net profit to Rs 2,538 crore from Rs 3,879 crore in the same period a year ago. Sequentially, its net profit rose marginally from Rs 2,520 crore in the first quarter of 2016-17.

A tidy rise in other income – treasury revenue, fees and service tax refund of Rs 796 crore – supported its profits. Other income rose by 35.9% to Rs 8,424 crore during the quarter from Rs 6,197 crore in Q2FY16.

Reflecting concerns over slippages and credit costs, SBI’s share fell by 3% to Rs 272 at close of trading on the BSE on Friday.

The net interest income - earnings from loans minus expenses on deposits - was flat (1.3% rise) at Rs 14,437 crore, from Rs 14,252 crore in Q2FY16. The lower credit offtake and reduction in lending rate impacted the bank’s interest income, SBI Chairperson Arundhati Bhattacharya said.

Provisions for non-performing assets (NPAs) rose to Rs 7,669 crore from Rs 3,841 crore in the same quarter a year ago.  In the first quarter of 2016-17, SBI had made provisions of Rs 6,339 crore for NPAs.

The bank’s provision coverage ratio improved to 62.12% in September 2016 from 61.57% in June 2016.

Its pool of bad loans grew sharply in 12 months to Rs 1,05,782 crore from Rs 56,834 crore a year ago. Sequentially, SBI managed to keep its asset quality under check as its gross NPAs were at Rs 1,01,541 crore at the end of June 2016.

Slippages into the bad loan category were about Rs 10,341 crore during the second quarter of 2016-17 from Rs 5,875 crore in the same period a year ago.

The outlook for resolution of stressed accounts was improving and recent amendments to rules for restructuring schemes would aid recoveries, Bhattacharya said.

SBI’s watch list for corporate loans that have high chances of slippage has declined to Rs 25,000 crore at the end of September from Rs 31,000 crore at the end of June.

SBI’s deposit base grew by 13.76% to Rs 18,58,999 crore and it raised the guidance for deposit growth to 15-15.5% from 13.5%. This revision comes on the back of a surge in money deposited in current and savings accounts after the government scrapped Rs 500 and Rs 1,000 notes as legal tender.

The bank’s gross advances rose by 8.11% to Rs 14,81831 crore. While retail credit – home, personal and vehicle loans – grew by 20.4% to Rs 3,50,465 crore,  loans to small enterprises shrunk by 6% to Rs 1,66,052 crore.

SBI’s capital adequacy ratio was 13.94% with Common Equity Tier I Capital at 10.28%.

Have confidence in professionals running Tata group Cos: SBI chairman

State Bank of India Chairman Arundhati Bhattacharya said the Tata group companies were ably managed by professionals.

Speaking to media after announcing the bank's second quarter results, SBI chairman said, "what owners do is not a concern as long as companies operate in a responsible manner."

The tussle between Ratan Tata, interim chairman of Tata Sons Ltd (TSL) and Cyrus Mistry, ousted chairman of TSL, had got the country’s largest bank worried.

The bank’s management has heard both sides and there has not been any intervention from the lender’s side.  

SBI had advised them to resolve the conflict in an amicable way to avoid any adverse impact on the working of operating companies in the group.

SBI financials
Figures in Rs cr	Q2FY16	Q2FY17	% chg
Interest earned	40,658	42,319	4.1
Other income	6,197	8,424	35.9
Interest expense	26,405	27,881	5.6
Provisions & contingencies	4,361	7,897	81.1
Net profit	3,879	2,538	-34.6
Gross NPA	56,834	1,05,783	86.1
Gross NPA (%)	4.2	7.1	299 (bps)
NPA: Non-performing asset
Bps: Basis point
Sources: Capitaline, Bloomberg
Compiled by BS Research Bureau