SBI Group Q1 net dips 78%, but says worst of NPAs behind it

Country's largest lender State Bank of India on Friday reported a massive 77.8 percent fall in its net profit to Rs 1,046 crore for the June quarter due to nearly two-fold jump in provision for bad loans.

Mumbai: State Bank of India on Friday reported 78 percent plunge in consolidated net profit at Rs 1,046 crore in April-June on higher provisions for bad loans at its five associates, though asset quality seemed to be improving.

Total income during the three-month period rose to Rs 69,415 crore against Rs 63,164.5 crore in April-June, 2015-16.

On a standalone basis, net profit of the state-run bank declined at a much lower rate of 32 percent to Rs 2,521 crore from Rs 3,692 crore a year ago.

"The worst is behind us when it comes to stressed assets. But let me warn you that the recovery will be slow and staggered as all those accounts marked in the watch list display stress. But I don't think we will be revising upwards the watch list of Rs 31,000 crore going forward," Chairperson Arundhati Bhattacharya told reporters here.

She went on to add that "we are still looking at resolution picking up pace. Resolution has started but they have not picked up pace to that extent and specially in respect of the larger accounts, we really need to see much more movement. But that will happen over a period of time."

Bhattacharya attributed the lower numbers to the massive provisioning the five subsidiary banks have done in the quarter ahead of their merger with the parent towards the end of the year. "Whether the stress is in their books or in the combined entity's it makes the same impact. So they made additional provisions to match the parent's level provisioning ahead of the merger."

The market lapped up the improvement in asset quality and the bottomline numbers which were as per the market's estimate and also the guidance. SBI counter rallied over 9 percent intra-day on the BSE, one of the best gains in many years.

Gross non-performing assets rose to 6.94 percent to Rs 1,01,541 crore in the first quarter from 4.29 percent or Rs 56,421 crore, while net NPA rose to 4.05 percent to Rs 57,421 crore as against 2.24 percent, or Rs 28,669 crore.

Accordingly, total provisions jumped up by 55 percent to Rs 8,533 crore from Rs 5,510 crore. Loan loss provisions was at Rs 6,340 crore and standard asset provisions stood at Rs 917 crore.

In the last quarter of FY2015-16, the bank had put up accounts worth Rs 31,000 crore on 'special watch list' following the AQR (Asset Quality Review) of the Reserve Bank.

Bhattacharya said there are no additions to the watch list and it has been retain at Rs 31,000 crore.

The net interest margins declined to 2.83 percent from 2.99 percent.