State Bank of India chairman Arundhati Bhattacharya has announced a 35 per cent fall in net profit at Rs 2,375 crore for the second quarter FY14. This is her first announcement of results after taking over the corner office and continues with the trend set by her three former predecessors of showing a sudden dip in performance immediately after taking over.
In each case the dip in performance is due to surge in provisioning for non-performing assets as a percentage of total assets. Bhattacharya,too,announced a 66 per cent year-on-year jump in provisioning for the quarter ended September 2013 which is why the profits have tanked below market expectations.
While Vaibhav Agarwal of Angel Broking said,The bank has witnessed elevated asset quality pressure for quite some time now,reflecting in the weak macro environment. We seek management comment particularly regarding the outlook on asset quality going ahead, others like Kajal Gandhi,banking analyst at ICICIdirect said,There has been marginal higher provisioning and the profits would have been above Rs 3,000 crore had it not been for mark-to-market losses of around Rs 800 crore on investments.
In April 2011,when Pratip Chaudhuri took over from OP Bhatt,the bank announced a sharp rise of 102 per cent in provisioning over the previous quarter at Rs 4,156 crore and profits slipped to a low of Rs 20.8 crore,down 99 per cent from Rs 1,866 crore registered in March 2010.
Similarly,even earlier in June 2006,when OP Bhatt took over from AK Purwar,for the quarter ended June 2006,the bank had announced a 34.7 per cent dip in its year-on-year profits. The provisioning for the quarter stood high at Rs 1,281 crore even though it had risen sharply in March 2006 to Rs 1,339 crore.
However in the following quarter in September 2006 it came down to Rs 681 crore.
Even in 2002 when Purwar took over as the chairman of the bank,in the first quarter result that followed,the bank announced a 6 per cent QoQ decline in its net profit and a 25 per cent jump in its provisioning over the previous quarter.
In all these cases the performance of SBI improved in the subsequent quarters.
For the current quarter the gross NPAs of Indias largest lender has risen to 5.64 per cent (Rs 64,206 crore) from 5.15 per cent (Rs 49,202 crore) in the preceding quarter.
Stress is great on the mid-corporate side, the SBI chairman said.
Its other stress area was a rise in operating expenses by a 32 per cent year on year rise to Rs 9,218 crore during the second quarter. The rise in operating expenses was on account of higher staff cost and increase in overheads.
Before SBI results,Bank of India and Canara Bank had posted a drop in non-performing assets which led analysts to believe that the bad loans weighing on the sector may be easing.
But they were the exceptions as Punjab National Bank and Central Bank later reported a big rise in NPAs (5.14 per cent and 6.47 per cent respectively). In a call with analysts,the SBI management said about 40 per cent of their expected Rs 10,000 crore of restructuring pipeline is dues to state electricity boards.