State Bank of In­dia's shares slump as bad loans gather pace

The Pak Banker - - COMPANIES/BOSS -

State Bank of In­dia, the coun­try's largest len­der by as­sets, slumped the most since Jan­uary as more loans turned bad last quar­ter than in the pre­vi­ous three months even as profit beat es­ti­mates.

Net in­come rose 10 per­cent in the three months ended June 30 to 36.9 bil­lion ru­pees ($575 mil­lion) from a year ear­lier, boosted by lower pro­vi­sions for bad loans, SBI re­ported Tues­day. While that beat the 34 bil­lion-rupee me­dian of 28 an­a­lyst es­ti­mates com­piled by Bloomberg, loan slip­pages climbed 54 per­cent from end-March, rais­ing con­cerns over bad debt.

"In­vestors ex­pect­ing an im­prove­ment in as­set qual­ity were dis­ap­pointed," Karthikeyan P, a Chen­nai-based bank­ing an­a­lyst at Cho­la­man­dalam Se­cu­ri­ties Ltd., said by phone. "While a fall in pro­vi­sions for non­per­form­ing as­sets sup­ported profit growth in the quar­ter, the fears re­gard­ing fur­ther pain in as­set qual­ity still linger."

The Mum­bai-based len­der, led by Chair­man Arund­hati Bhat­tacharya, joined ri­val Bank of Baroda in re­port­ing a larger ra­tio of soured credit. Pol­icy mak­ers' ef­forts to boost the econ­omy have yet to ig­nite credit growth at In­dian banks, which is sput­ter­ing near the slow­est pace since 1994.

Shares of SBI fell 4.9 per­cent, the most since Jan. 30, to 268.80 ru­pees in Mum­bai, af­ter ris­ing as much as 2.4 per­cent ear­lier. The S&P BSE In­dia Bankex In­dex, which tracks 10 lenders, sank 1.5 per­cent.

In the June quar­ter, the bank saw 73.2 bil­lion ru­pees of con­sumer and farm loans that went sour, com­pared with 47.7 bil­lion ru­pees as of March 31. Bad-loan for­ma­tion is al­ways high for SBI in the June quar­ter due to sea­sonal fac­tors, Bhat­tacharya told re­porters in Mum­bai on Tues­day. The fig­ure was 99.3 bil­lion ru­pees a year ear­lier.

Gross non-per­form­ing-as­set ra­tio widened to 4.29 per­cent from 4.25 per­cent in March, while pro­vi­sions for soured debt fell 28 per­cent to 33.6 bil­lion ru­pees from the pre­vi­ous quar­ter, ex­change fil­ings showed. SBI's bad­loan ra­tio for the June quar­ter com­pares with the 4.13 per­cent re­ported by Bank of Baroda on July 30.

SBI's net in­ter­est mar­gin nar­rowed to 2.99 per­cent in the June quar­ter from 3.13 per­cent a year ear­lier, an an­a­lyst pre­sen­ta­tion fol­low­ing the earn­ings showed, as the bank cut its base rate and loan growth slowed. Gross ad­vances grew by 6.6 per­cent to 13.1 tril­lion ru­pees in the year to June 30, SBI said in a press state­ment.

Its cap­i­tal-ad­e­quacy ra­tio stood at 12 per­cent, com­pared with a cen­tral bank re­quire­ment of at least 9 per­cent un­der global Basel III rules. State Bank got share­holder ap­proval in Fe­bru­ary to raise as much as 150 bil­lion ru­pees in a stock of­fer­ing to boost its cap­i­tal ra­tio.

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