SBI sur­prises with re­sults for Q1, share price jumps

There will be some pres­sure on NIM be­cause last quar­ter we had cre­ated about R45,000 crore of NPAs and we do not earn on those as­sets.

The Financial Express - - FRONT PAGE - fe Bureau

STATE Bank of In­dia (SBI) on Fri­day re­ported a bet­ter-than-ex­pected set of num­bers for the three months to June. Net profit came in at R2,521 crore, down 32% year-on-year on the back of higher loan loss pro­vi­sions that nearly dou­bled y-o-y to R6,340 crore.

The SBI stock soared 9.14% on the BSE in in­tra­day trade be­fore end­ing at

R243.20, up 7.16%. So far in 2016, the stock has out­per­formed the Sensex, gain­ing 8.38% against a 7.8% rise in the Sensex.

In­dia’s largest lender re­ported a healthy growth in op­er­at­ing profit to R11,054 crore, up 20% y-o-y, but as­set qual­ity de­te­ri­o­rated marginally with gross non-per­form­ing as­sets (GNPAs) as a share of gross ad­vances ris­ing 44 ba­sis points se­quen­tially to 6.94%. The net NPA ra­tio also grew by 24 ba­sis points se­quen­tially to 4.05%. The largest chunk of NPAs came from the mid-cor­po­rate seg­ment, which re­ported a gross NPA ra­tio of 19.59%, fol­lowed by large cor­po­rates at 7.07%.

Chair­man Arund­hati Bhat­tacharya hinted the bank’s net in­ter­est mar­gin (NIM) could be un­der pres­sure. “There will be some pres­sure on NIM be­cause last quar­ter we had cre­ated about

R45,000 crore of NPAs and we do not earn on those as­sets,” Bhat­tacharya ex­plained.

Net in­ter­est in­come — the dif­fer­ence be­tween in­ter­est earned and in­ter­est ex­pended — rose 4.22% y-o-y to

R14,312 crore and its NIM — a key mea­sure of prof­itabil­ity — fell 20 ba­sis points y-o-y.

Bhat­tacharya said the lender would stay with a “watch list” of R31,000 crore, adding that these ac­counts needed to be closely mon­i­tored. Bhat­tacharya sounded op­ti­mistic the stress would ease in com­ing quar­ters, say­ing the the kind of spike seen in the June quar­ter was un­likely to be re­peated.

“Over a pe­riod of time this will nor­malise but I would not put it be­yond next three quar­ters as res­o­lu­tion is also pick­ing up,” she said. Of to­tal slip­pages of

R8,790 crore into bad loan cat­e­gory, R2,947 crore orig­i­nated from the watch list. “The last time we had not in­cluded the in­ter­na­tional bank­ing group num­bers in the watch list but we have re­alised here are In­dian as­sets which have a for­eign leg and have now in­cluded those,” Bhat­tacharya said.

In the March quar­ter, the bank had cre­ated a watch list of ac­counts worth R31,352 crore and ex­pected 70% of it to slip into non-per­form­ing cat­e­gory in a worst-case sce­nario. Re­cov­er­ies in Q1 FY17 were at R1,647 crore and the bank also up­graded loans worth R1,169 crore from non­per­for ming to stan­dard.

SBI’s cap­i­tal ad­e­quacy ra­tio rose 201 bps y-o-y to 14.01% in Q1FY17 and one of the ma­jor con­trib­u­tors to growth was reval­u­a­tion of real es­tate as­sets worth

R31,965 crore, of which R14,384 crore could be used. “From the reval­u­a­tion of re­serves from fixed as­sets, 45% has been con­sid­ered for cap­i­tal. So it has added around 72 bps to the cap­i­tal,” she said.

ARUND­HATI BHAT­TACHARYA

SBI chair­man

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