Mumbai: State Bank of India (SBI) Friday reported a 30.16 percent rise in net profit at Rs 3,658 crore for quarter ended September 30, on the back of lower provisions towards bad loans and better management of credit.
In the first quarter of the fiscal, the bank had reported a net profit of Rs 3,752 crore, a massive 137 percent rise over the year-ago period, driven by higher income and lower growth in operating expenses.
The profit in July-September 2012 was boosted by a steep 37 percent drop in provisions for NPAs at Rs 1,837 crore from Rs 2,921 crore a year ago, as the bank had made higher provisions in the previous quarter.
Total income rose 12 percent to Rs 32,953.47 crore from Rs 29,394.32 crore a year ago.
"The (higher) net profit can be attributed to lower provisioning and also better management of the credit portfolio," SBI chairman Pratip Chaudhuri told reporters at the bank's Nariman Point headquarters.
However, the bank witnessed subdued growth in its core interest income due to a slower credit growth, he said.
SBI's net interest income (NII), which is the difference between interest earned and given away, grew only 4.96 percent to Rs 10,974 crore in the reporting quarter compared to Rs 10,482 crore in the same period last fiscal.
The key profit criterion, the net interest margin (NIM), which is the difference between the cost a bank incurs on deposits and the yield it receives by lending it in terms of interest, stood at 3.77 percent for domestic operations and 3.45 percent at the entity level.
In the same period last fiscal, NIM stood at 4.09 percent in the domestic business and 3.81 percent for the group.
"We are confident of maintaining NIM above 3.75 percent in the current fiscal," Chaudhuri said, adding that lowering of deposit rate will support the improvement in margin.
But concerns on asset quality continued with rise in both gross and net NPA numbers. While gross NPA jumped to 5.15 percent of total advances from 4.19 percent a year ago, net NPA rose to 2.44 percent from 2.04 percent.
In absolute terms, gross non-performing assets rose to Rs 49,202.46 crore, while net NPA rose to Rs 22,614 crore. The net NPA addition stood at Rs 13,200 crore against Rs 11,400 crore a year ago.
However, the bank said provisions for NPA came down by 37 percent, as the bank has made higher provisions in the previous quarter.
After plunging over 4 percent intra-day, SBI shares closed 3.89 percent down at Rs 2,156.35 on the BSE, whose main index Sensex was also down by 0.86 percent or 163 points.
Analysts said the market reacted badly as the asset quality worries returned to haunt SBI.
Kotak Securities banking analyst Saday Sinha said asset quality continued to disappoint for SBI. "Although net (profit) grew marginally higher than our expectations on back of lower NPA provisioning, the negative surprise came on the addition to stressed assets at Rs 13,200 crore as against Rs 11,400 crore seen during the previous quarter," he said.
Higher recovery up-gradation is definitely positive but sustaining this kind of run-rate in future will be difficult, which is a key risk, he said.
Emkay Global Financial Services said the SBI numbers have disappointed yet again. "The numbers are significantly below our expectations. Earnings dragged by 0.16 percent contraction in NIM and lower NII. Asset quality worsens further with gross NPA jumping to 4.3 percent," it said.
SBI chairman said the bank is shying away from taking bulk deposits, which stands at 1.3 percent of overall base at the end of September.
Referring to the low-cost current account, savings account deposits (Casa), the bank said it came down to 44.95 percent from 47.42 percent a year earlier.
Chaudhuri, however, said savings deposit growth remains rock steady for the bank, in spite of aggressive offerings by new-age private sector banks.
Fresh slippages in the second quarter were at Rs 8,000 crore while the upgradation in accounts worth Rs 3,000 crore had been witnessed during this period.
Chaudhuri said the upgradation was possible due to the bank's policy of frontloading the account to NPAs, and the last quarter they had put quite a few accounts in hotel, construction and power sector which had turned into NPAs due to non-receipt of receivables and consequently repaid.
Giving guidance on slippages, the chairman said net accretion per quarter will not be above Rs 4,000 crore going ahead.
"We have been proactive in declaring NPAs and we had already indicated that quite a few accounts turned into NPA pending receipt of receivables," he said.
On the restructured assets, he said a total of Rs 4,694 crore worth of accounts had been restructured taking the total number to Rs 40,000 crore, which is 5.98 percent of the total loan book.
Deputy managing director Soundara Kumar, who is in charge of risk management, said there is a pipeline of Rs 4,000 crore of accounts, which may be recast in Q3.
On credit and deposit growths, Chaudhuri said the bank achieved 17.94 percent growth in credit and 16.5 percent in deposits, and added that he is hoping to close the year with 16-18 percent spike in advances.
"We are consciously growing slow in deposit mobilisation and have excess liquidity of around Rs 75,000 crore which is enough to support our credit growth," he said.
The bank will go slow in mid-corporates and SME sectors due to the ongoing economic gloom, which is also drying up demand from large corporate segments, Chaudhuri said, adding the retail lending will be key focus area for the bank.
The bank has lent enough to agriculture (credit growth of 20 percent) and hopes to save the money from putting in the Rural Infrastructure Development Fund (RIDF).
The chairman also said following the reduction in home loan rates, the bank has witnessed a surge in proposals to Rs 150 crore per day from the earlier Rs 65 crore.
The bank's capital adequacy ratio stood at 12.63 percent with tier-I capital at 8.97 percent. "If we include the profits, the tier-I capital will go above 10 percent by the end of this fiscal and above 11 percent if the government infuses some funds," Chaudhuri said.