SBI stock surges 3.7% on hopes that worst on NPAs is behind

State Bank of India posts record loss of Rs 77 bn in Q4

Mumbai: The markets shrugged off SBI’s massive quarterly loss after the bank’s chairman, Rajnish Kumar, said the worst on bad loans was behind the lender. The bank’s stock went up 3.7 per cent. While some financial parameters worsened, other key data points showed an improvement. 

For instance, there was a sharp fall in overall stressed assets (watch list, net NPA, etc) to 6.7 per cent of advances in Q4 from 8.5 per cent in the December quarter (Q3) with no outstanding in various restructuring buckets such as SDR and S4A. 

The bank also increased the provision coverage ratio, which came in at a reasonable 66.2 per cent, making investors believe that the bigger stress for SBI was now behind. Moreover, it believes that FY19 would see higher loan growth of 10 per cent, almost twice the pace seen in the year gone by, and expects net interest margins to improve. On the recovery of bad loans, it hopes a big chunk to get resolved in the first half of FY19.

Kumar said the bulk of the loan slippages were loans that were part of various restructuring schemes. With this, the only source of potential stress for the bank was the watchlist, which now stood at Rs 258 billion.