Riding on lower provisioning and stable asset quality, State Bank of India (SBI), India’s largest commercial bank, has reported a standalone profit of Rs 2,312.20 crore for the quarter ended June 2019, as against a loss of Rs 4,875.85 crore in the same period last fiscal. On a quarter-on-quarter basis, it reported a 176 per cent jump in profit against Rs 838.40 crore in March quarter even as fresh loan slippages rose sharply.
While higher other income and operating income also boosted profitability, tepid net interest income (NII) growth limited profits. Net interest income grew 5.2 per cent year-on-year (y-o-y) to Rs 22,938.8 crore in June quarter 2019, with loan growth of 13.8 per cent on a y-o-y basis.
Significantly, gross non-performing asset (NPA) ratio fell to 7.53 per cent of advances, down 316 basis points from 10.69 per cent in June last. Gross NPAs in absolute terms fell both sequentially as well as y-o-y basis. Gross NPAs were Rs 168,494 crore in June 2019 as against Rs 212,840 crore a year ago. However, fresh slippages rose sharply to Rs 16,212 crore this June, from Rs 9,984 crore a year ago and Rs 7,505 crore in March quarter.
Decline in gross NPAs in absolute terms a big positive
The SBI chief has warned that it would be difficult to increase the bank’s net interest margins (NIM), a key indicator of the bank’s profitability, on account of subdued credit growth. Significantly, gross NPA ratio declined to 7.53 per cent of advances, down 316 bps from 10.69 per cent in June 2018. Gross NPAs in absolute terms declined both sequentially as well as year-on-year basis, which is a big positive.
“Every quarter I am looking at the sky and praying to God that the three large NCLT accounts stuck in the middle of resolution get resolved. These alone will give us Rs 16,000 crore write-back,” SBI Chairman Rajnish Kumar said.
Kumar said one regular account of a Maharatna company which became NPA of another bank further impacted the gross slippage. Another account failed to successfully implement the resolution plan, adding Rs 2,000 crore to the slippages, he said. It has made Rs 1,200 crore provision on standard account of a stressed housing finance company.
According to SBI, 453 accounts with outstanding of Rs 113,809 crore have been admitted to NCLT.
Accounts under the two lists have a fund-based outstanding of Rs 38,741 crore. “Three accounts are in an advanced stage of resolution with expected recovery of 62 per cent. Post June 7 RBI circular, 46 accounts (24 NPA and 22 standard) were eligible for signing ICA (inter-creditor agreement), of which six NPAs filed/admitted in NCLT and two standard accounts have since been regularised,” the bank said. Bad loans in the agriculture portfolio rose to Rs 26,298 crore (13.08 per cent of advances) in June 2019 from Rs 21,830 crore (11.60 per cent) a year ago. The agri portfolio in just one state contributed around Rs 2,000 crore to slippages in the wake of debt waiver issues.
On the auto sector which is now facing a slowdown, SBI said it has an exposure of Rs 11,500 crore, but clarified that there was no risk of concentration of stress. It said that robust domestic credit growth at 11.89 per cent was driven by both retail (18.68 per cent growth) as well as high rated corporates (11.62 per cent). Domestic net interest margin rose to 3.01 per cent in Q1 of FY20.