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SBI posts mere 4% growth in Q3; bad assets rise

On a consolidated basis, net income fared a tad better with 7.65 percent growth to Rs 4,648 crore.

Mumbai: State Bank of India on Thursday reported a moderate 4 percent growth in profit -- the lowest in the past six quarters -- at Rs 3,396 crore in October-December quarter on fall in core income and higher provisioning due to rise in bad assets.

Total income of the bank rose to Rs 33,992 crore during the third quarter from Rs 29,787 crore in the same period a year ago.

Bad assets as gross NPA level touched 5.30 percent in the quarter, compared to 4.61 percent in the same period last fiscal, with fresh slippages of over Rs 8,100 crore.

SBI Chairman Pratip Chaudhuri attributed the rise in bad loans to slowing economic growth, high interest rates, difficulties faced by government in paying contractors and also some sector-specific issues like with iron and steel segment due to mining scams.

Chaudhuri reiterated that the worst is over for his bank on asset quality and added that up to Rs 2,000 crore of the NPA has already turned standard as of December.

"NPAs have peaked. What gives us comfort is that sectors like textiles, construction and roads are picking up."

SBI, which has exposure to many of the troubled firms, including state electricity boards, Kingfisher Airlines, Air India and Suzlon, saw its net NPA rise to 2.59 percent of assets in the December quarter from 2.22 percent a year ago.

Country's largest lender also saw a drop in fee income at Rs 2,559 crore in the quarter from Rs 2,642 crore a year ago.

Shares of SBI fell 3.5 percent after the result, but later recovered to close down 1.80 percent.

The SBI chief said mid-corporate segment continued to see some defaults, making the bank little hesitant and selective in lending to this sector.

Net interest income (NII), the core income for a bank, dipped 3.16 percent to Rs 11,154 crore in the third quarter ended December 31 due to shifting of Rs 20,000 crore of pension corpus to a separate trust along with a rise in interest expended.

Kotak Securities banking analyst Saday Sinha said the SBI's NII was impacted due to a sharp margin contraction (down 65 bps), while net profit was impacted by higher NPA provisions, which spiked 50 percent sequentially, despite robust other income growth, which clipped 76 percent.

Although addition to stressed assets is marginally down, it still remains at elevated levels, he said.

Total provisioning of the bank stood at Rs 4,394.70 crore during the December quarter, up from Rs 3,996.97 crore in the corresponding period last fiscal, SBI said in a statement.

The gross non-performing assets, which represents portion of bad loans, stood at Rs 53,457 crore at the end of December, up from Rs 40,098 crore in the year ago period.

However, Kotak Securities gave an 'Accumulate' call on SBI shares, saying the current market price is reasonable.

IndiaInfoline Research head Amar Ambani said SBI's disappointing numbers, which is the lowest growth rate in net income in six quarters, belie the hypothesis that the worst of the credit cycle is behind the nation's largest lender.

Referring to the restructured assets, Chaudhuri said around Rs 3,700 crore is on the pipeline of which Rs 2,500 crore is likely to come from the mid-corporate segment.

Additionally, the bank will have to provide up to Rs 600 crore towards wage increase of 15 percent starting the next quarter, Chief Financial Officer Diwakar Gupta said.

On the net interest margin front, the lender reported a flat NIM of 3.72 percent in the third quarter.

"We hope to maintain the NIM at the current level or it may improve to 3.75 percent," Chaudhuri maintained.

However, the bank has witnessed a drop in the low-cost deposits (Casa) to 45.54 percent in the third quarter from 47.52 percent reported in the same period last fiscal.

On the advances front, the bank has seen a steady growth of 16.07 percent, while deposits expanded by 15.56 percent in the period under review.

The growth in advances was driven by power and telecom sector and retail segments, Chaudhuri said, adding the SBI has now become the largest player in the auto loan segment.

"We hope to grow over 18 percent in advances and 14 percent in deposits by the end of this fiscal," he said.

By end of the reporting quarter, the bank's capital adequacy stood at 12.21 percent with Tier-I capital of 8.66 percent.

"We hope to reach a Tier-I capital of more than 10 percent by the fiscal-end with infusion of Rs 3,000 crore from the government through preferential allotment route. We plan to do the rights issue some time next fiscal," Chaudhuri said.

He said as the bank's post tax profit would touch Rs 15,000-crore-mark this fiscal and it would add around Rs 12,000 crore to the capital base.

On a consolidated basis, net income fared a tad better with 7.65 percent growth to Rs 4,648 crore.


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