State Bank of India, the country’s largest lender, reported a third-quarter loss of ₹2,416.37 crore due to a rise in bad loans and depreciation on bond investments.
While the lender reported a ₹2,610-crore profit in the same period of the previous financial year, the numbers are not exactly comparable since SBI had merged five of its subsidiaries in April 2017.
This is first time the lender has posted a quarterly loss since January-March 1999, when it recorded a loss of ₹115 crore.
The bank had to classify ₹25,830 crore worth of loans as non-performing this quarter. The Reserve Bank of India conducts an annual inspection of banks’ books and directs banks to make additional provision where the regulator thinks it necessary.
The RBI had asked SBI to make an additional NPA classification of ₹23,239 crore based on its inspection. While about ₹3,000 crore of that amount was already classified as NPA in the previous quarters, the remaining amount was classified as NPA in the third quarter. About 90% of slippages in the third quarter were from the corporate loan book. SBI also had to make mark-to-market provisions of ₹3,500 crore in the period due to a rise in yields in its bond portfolio. Its treasury income fell to ₹1,000 crore from ₹3,000 crore a year earlier.
Provisioning rises
As a result, provisioning burden for the bank went up by a whopping ₹10,000 crore year-on-year to ₹18,876 crore. Provisions for non-performing assets were ₹17,760 crore in the quarter compared with ₹7,255 crore in the year earlier period.
Gross non-performing assets were at ₹1.99 lakh crore (10.35% of total advances) at December-end as compared with ₹1.86 lakh crore (9.83%) in September and ₹1.08 lakh crore (7.23%) in December 2016. Provision coverage ratio as on December 31, 2017, stood at 65.92%.
“The current quarter was disappointing,” SBI chairman Rajnish Kumar said in the post earnings media interaction. “But every cloud has a silver lining.”
This was the first time SBI announced its quarterly earnings since Mr. Kumar took charge in October.
He said most of the recognition of bad loans had been made and the resolution process was underway. SBI, he said, was hopeful of presenting a better financial performance in the next fiscal year.
He added the aim was to lower both slippage ratio and credit cost to below 2% — the metrics were at 4.17% and 3.18% respectively in the 9-month period this fiscal.
Asked about the Jan.-March quarter, he said, “I do not want to sound optimistic but I am not pessimistic also. But, in 45 days no miracle can happen.”
