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SBI Q1 profit falls 13.6%; shares battered on BSE

Total income increased to Rs 36,192.62 crore in the quarter, from Rs 32,415 crore in the same period a year ago.

Mumbai: Country's largest bank SBI Monday reported a 13.6 percent decline in stand alone net profit to Rs 3,241.08 crore for the quarter ended June 30 due to a spurt in bad assets in agriculture and SME sectors and around Rs 1,300 crore provisioning for foreign operations and pensions.

State Bank of India (SBI) had a stand alone net profit of Rs 3,752 crore in the same quarter last year.

Its total income increased to Rs 36,192.62 crore in the quarter from Rs 32,415 crore in the same period a year-ago.

SBI Chairman Pratip Chaudhuri, who will be hanging up his boots by September-end unless he gets an extension, attributed the rise in bad assets to the "unexpected stress emanating from loans to agriculture and small businesses and on the foreign operations due to interest spike in the US".

He was, however, hopeful of reversing losses in most of the sub-groups by the second quarter.
When asked whether SME and agri books will have the same bad asset run rate going forward, Chaudhuri said "the good monsoons should help reverse the trend".

"The profit was hit because of a Rs 576 crore provisions on investment depreciation for foreign operations triggered by a hardening of yields in the US treasury bills", he said.

Chaudhuri said another factor that adversely affected the bottom line was "the Rs 700 crore excess provisioning for employee pension which arose as a result of LIC increasing the average life expectancy by five years to 81".

The bank will take a hit of up to Rs 600 crore per quarter over the next three quarters on this front, the SBI chief said.

The fall in profit came in even as the bank made 19 percent lower provisions at Rs 2,266 crore during the reporting quarter. Chaudhuri said agri and SME assets do not require higher provisioning.

SBI shares were battered on BSE as the stock lost 5 percent intra-day before ending the day lower 3.41 percent.

Slippages from agriculture stood at Rs 3,245 crore and the Chairman said renewals of the short-term advances are a "low hanging fruit" which will help turn over the situation in the second quarter.

Asked if he sees more stress on the agri portfolio in the run-up to the general elections and perceived propensity not to pay, Chaudhuri answered in the negative.

Slippages for the small and medium enterprises segment was Rs 3,925 crore. Head of national banking A Krishna Kumar said up to Rs 2,500 crore will be pulled back in the second quarter as account-specific monitoring is being done.

"Possibly it (the uptick in stress from agri and SME segments) is due to a lack of hard work," Chaudhuri said, adding other segments like mid corporates, which have been experiencing stress due to the economic conditions, have pulled up their socks.

Chaudhuri had declared in the beginning of the fiscal that the bank was winning the war against NPAs. When asked about the same Monday, he said the conditions on the macro front have made it difficult. "But that does not mean that we have thrown in the towel".

On the back of fresh slippages of Rs 13,766 crore, its gross non-performing assets surged to Rs 60,891 crore or 5.56 percent of the total assets, as against 4.99 percent a year back.

On a consolidated basis, SBI saw profit falling 11.82 percent to Rs 4,299 crore.

Brokerage house Motilal Oswal Securities said the bottom line has been hit by the jump in employee expenses and the pressure on asset quality.

Core net interest income grew at a modest 3.48 percent to Rs 11,512 crore, while the other income was up 28 percent to Rs 4,474 crore on treasury gains.

Out of this Rs 1,201 crore came in from treasury income with Rs 864 crore of it being the gains from G-Secs sale.

Its domestic net interest margin got squeezed to 3.44 percent as against the 3.86 percent in the same period year ago, which Chaudhuri attributed to surge in the NPAs which do not earn interest for the bank.

He said the bank is still confident of increasing the number to the earlier guidance of 3.50-3.60 percent, while managing director for international banking Hemant G Contractor said international margins will stay muted at 1.50 percent.

SBI restructured Rs 5,800 crore of fresh assets during the reporting quarter, taking the total restructured book to over Rs 44,800 crore. The component of the gross non-performing assets and restructured assets as a percentage of the book grew to 8.57 percent.

SBI said it expects around Rs 10,000 crore in fresh loan recast going forward.

The share of the low cost current and savings accounts deposits dipped by over three percentage points to 44.34 percent, but Chaudhuri said this is a industry-wide phenomenon.

The bank's total capital adequacy stood at 12.12 percent as on June 30, 2013 with the core tier-I capital at 9.01 percent.


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