State Bank of India - the country’s largest lender- reported a 20% drop in net profit of Rs 2006 crore for the quarter ended June 30 as compared to Rs 2521 crore reported in the same period of the previous year. The numbers, however, are not exactly comparable since SBI merged five of its associate banks and Bharatiya Mahila Bank on 1 April 2017.
Bad loans registered a sharp increase for the merged entity, with gross non-performing assets increased from 1.01 lakh crore (6.94%) to Rs 1.88 lakh crore (9.97%) in the one year.
“During the period of one quarter (when the merger process was on) the time of follow up we needed to do on the retail side that went missing,” Arundhati Bhattacharya, chairman SBI said in the post earnings conference call.
“We were expecting this. The slippages number that came in this quarter was in the range of Rs 26,249 crore. Of this Rs 8363 crore are from the corporate book. 95% of the corporate slippages have come from the watchlist,” she said.
SBI said the remaining NPA (Rs 17,880 crore), came from the retail book. She said bad loans in agricultural portfolio has also worsened due to loan waiver promises. SBI expects these bad loans, which are under its national banking portfolio, will see a ‘pull back’ to the standard category. Lower retail slippages and higher recoveries will lead to reduction in retail NPAs, the bank said.
The bank is confident that the slippage ratio to decline from 5.78% in FY17 and 5.38% in Q1FY18 to below 3.3% for FY18.
“Despite the massive clean-up in FY17, elevated slippages are disappointing,” HDFC Securities said in a note.
The bank’s domestic net interest margin (NIM) declined by 54 bps year-on-year to 2.5% in April - June and by 43 bps sequentially. However, the bank expects NIMs to pick up from current levels by 10-15 bps.
SBI stocks ended 5.36% lower on the Bombay Stock Exchange to close the day at Rs 280.65.
Bank of Baroda net down 52%
Another public sector Bank of Baroda reported nearly 52% fall in net profit at Rs203.39 crore for the first quarter ended June as slippages stayed elevated.
Fresh slippages were Rs 4384 crore during the reporting period as compared to Rs 5527 crore during the same period of previous year. On a sequential basis, slippages were higher by about Rs 800 crore.
“There were one or two lumpy accounts that slipped during the quarter,” said PS Jayakumar, chief executive officer and managing director of Bank of Baroda.
“But we are staying with our guidance that net slippages will be contained within Rs 4000 crore for the entire financial year,” he said.
The bank’s gross NPA was at Rs 46,173 crore (11.4%) in June end, up from Rs 42991 crore (11.15%).
