SBI’S Q3 profit falls 7% on higher provisions

MUMBAI: State Bank of India (SBI) on Thursday said net profit in the December quarter fell 6.9% from a year ago, as the country’s largest lender made higher provisions for bad loans. Profit at ₹5,196 crore, however, topped the ₹4,850.5 crore average estimate of 15 analysts polled by Bloomberg.

With less than two months left in the financial year, the bank lowered its FY21 credit growth guidance from 8-9% announced in November to 7%. To be sure, even at this level, the public sector lender’s loan growth would be higher than 5.64% it reported in FY20.

“I would also like to mention that the disruption that we witnessed in the past relating to covid-19, seems to be waning now. There is a whole lot of positivity in the industry, the economy and the positive news of vaccination is shoring up confidence levels,” SBI chairman Dinesh Khara said.

SBI had said in November that its debt recasts and slippages will not cross ₹60,000 crore in FY21, and the numbers released on Thursday indicated that the bank will manage to meet this guidance. The bank also met its guidance on debt recasts.

The management had also said in November that it received recast requests of ₹6,495 crore and expected another ₹13,000 crore by 31 December. On Thursday, the bank disclosed it has received restructuring requests of ₹18,125 crore till 31 December.

“Meeting the asset quality guidance is definitely positive. I think, if they are able to bring down provisions and credit growth rebounds, then the bank could see better earnings growth in the coming quarters,” said an analyst at a domestic brokerage firm.

Of the debt recast requests, about ₹3,900 crore came from retail-personal loans; small and medium enterprises were around ₹2,500 crore and corporates were about ₹11,000 crore.

“We are taking a pragmatic approach when it comes to restructuring requests and we are cognizant of the issues corporates have faced,” said Khara.

The bank’s proforma slippages for the nine months ending December 2020 was at ₹16,461 crore and coupled with recast requests, the number stood at ₹41,000 crore.

Lenders have been prohibited from classifying certain loans as bad after 31 August by the Supreme Court. However, banks have been transparently reporting the true quality of those assets with a disclaimer that they have not yet been classified as bad owing to the court order, calling them proforma NPAS.

SBI said 4.77% of its gross advances turned bad as on 31 December, lower than 5.28% in the September quarter. Had it not been for the court order, its gross NPAS would have been 5.44%.

The state-run lender also holds covid-19 provisions of ₹12,976 crore as on 31 December, including money set aside to cover proforma slippages.