SBI posts record profit on Essar recovery
MUMBAI: State Bank of India (SBI), the country’s largest lender, reported its highest quarterly profit on Friday as it wrote back provisions on bad loans owing to recovery of ₹11,000 crore from the resolution of bankrupt Essar Steel.
Net profit rose 41% to ₹5,583 crore in the December quarter from ₹3,954 crore in the year earlier. That compares with the ₹5,871.6 crore estimated by 13 analysts in a Bloomberg poll.
Net interest income, the difference between interest earned and expended, stood at ₹27,778.79 crore in the three months ended December, an increase of 22.4% from the year-ago period and its other income increased 13.3% to ₹9,106 crore. Net interest margin, a key measure of profitability, widened by 37 basis points sequentially to 3.59%.
Chairman Rajnish Kumar said that considering the challenges facing the banking industry, the recovery from Essar Steel had helped. “That apart, there was some setback on account of slippage of a housing finance company (Dewan Housing Finance Corp. Ltd, or DHFL),” said Kumar.
The bank added fresh bad loans worth ₹16,525 crore which includes exposure to DHFL. Still, the bank saw an improvement in its asset quality in the third quarter. Gross non-performing assets (NPAs) as a percentage of total advances stood at 6.94%, down 177bps on a year-on-year basis and 25bps sequentially.
SBI’s management told analysts that the bank has not downgraded or classified Vodafone as an NPA this quarter. However, it is working on a debt resolution plan contingent on the telecom company not getting relief on
AGR dues from the Supreme Court.
“Even in Q4 of FY20, slippages in corporate book are not going to exceed ₹1,200 crore. No large ticket loans are under stress. Average slippages in the agriculture loan may not exceed of ₹1,000 crore in every quarter, as seen earlier. We are looking at a [total] slippage of not exceeding ₹5,000-6,000 crore in the March quarter,” said Kumar.
SBI disclosed in December that the RBI found that it has underreported bad loans and their provisioning by ₹11,932 crore and ₹12,036 crore, respectively, in FY19. SBI made full provisions against the divergence in Q3.
Kumar was confident that in the March quarter, provisioning requirements will come down. He said that slippages would be very nominal on corporate loans. Moreover, he expects total provisions required under inter-creditor agreements, even in the worst scenario, is not going to exceed ₹1,100 crore.