State Bank of India, India’s largest lender, has posted a 7.8 per cent fall in the fourth quarter profit on account of higher provisioning against sticky loans, but its asset quality improved, sending its stock nearly 10 per cent higher on the bourses.
The bank’s net profit was at Rs 3,041 crore for the fourth quarter ended March 31, 2014 as against a net profit of Rs 3,299 crore on standalone basis in the same quarter of the previous fiscal. SBI stock surged 9.69 per cent to settle at Rs 2,755.25 on the BSE as the stock market cheered the improvement in its asset quality. Higher other income, improvement in asset quality and net interest income helped the net profit beat analysts’ expectations.
According to SBI chairman Arundhati Bhattacharya, the bank’s operating profit increased by 36.95 per cent on a year-on-year basis from Rs 7,761 crore in the previous quarter to Rs 10,628 crore in March 2014. Higher provisions of Rs 7,587 crore as against Rs Rs 4,461 crore in the previous quarter and future wage revision pulled down the profits of the bank.
SBI said net non-performing loans as a percentage of total assets fell to 2.57 per cent in the March quarter from 3.24 per cent in the preceding December quarter, but were still higher compared to 2.10 per cent in the year-ago quarter. Its gross NPAs were down at 4.95 per cent (Rs 61,605 crore) as against 5.73 per cent (Rs 67,799 crore) in the December quarter. “Fresh slippages were lower at Rs 7,947 crore in March quarter as against Rs 11,438 crore in the December quarter,” the SBI chairman said.
“SBI reported healthy performance on the asset quality front while operating performance came ahead of our estimates. The bank has witnessed significant asset quality improvement in the current quarter,” said Vaibhav Agrawal, VP research-banking, Angel Broking.According to the bank, recoveries in the quarter ended March stood at Rs 3,389 crore as compared to Rs 1,538 crore quarter-on-quarter while write-offs were Rs 5,698 crore as against Rs 5,077 crore on Q-o-Q basis. Net interest income increased by 16.47 per cent on Y-o-Y basis to Rs 12,903 crore by March 2014.
Bhattacharya said the bank has decided to adopt some quantitative changes in risk management to improve asset quality.
The bank also formed committees to look at accounts showing stress. “The stressed sectors of the bank were engineering, textiles, pharmaceuticals and services,” she said.
The bank was also particular in maintaining a healthy SME portfolio as well as restructuring of agri-products besides priority sector lending, she said. SBI would also conduct a professional study on operational risks.