Bank chief attributes the rise in bad assets to ‘unexpected stress emanating from loans to agriculture and small businesses’
State Bank of India (SBI), on Monday, reported a 13.6 per cent drop in standalone net profit at Rs.3,241 crore for the first quarter ended June 30, 2013, as compared to Rs.3,752 crore in the corresponding period in the previous year.
“The net profit was pulled down by Rs.500-crore provisioning in the international books and an additional provisioning for pension obligations,’’ said Pratip Chaudhari, Chairman, SBI, while addressing a press conference here.
“The cost of funding for SBI is the lowest in the industry. The bank is sitting on a liquidity of Rs.60,000-70,000 crore,’’ he added.
“However,” he said, the slippages were at a high, “which was a surprise.” But, he said, “We will pull back by restructuring and repayment.”
Its total income increased to Rs.36,192.62 crore in the quarter from Rs.32,415 crore in the same period a year—ago.
Mr. Chaudhuri, who will be hanging up his boots by September-end unless he gets an extension, attributed the rise in bad assets to the “unexpected stress emanating from loans to agriculture and small businesses and on the foreign operations due to interest spike in the U.S.’’
He was, however, hopeful of reversing losses in most of the sub-groups by the second quarter.
When asked whether SME and agri books would have the same bad asset run rate going forward, Mr. Chaudhuri said “the good monsoons should help reverse the trend.’’ “The profit was hit because of a Rs.576-crore provisions on investment depreciation for foreign operations triggered by a hardening of yields in the U.S. treasury bills,” he said.
Mr. Chaudhuri said another factor that adversely affected the bottom line was “the Rs.700 crore excess provisioning for employee pension which arose as a result of LIC increasing the average life expectancy by five years to 81.’’
The bank would take a hit of up to Rs.600 crore a quarter over the next three quarters on this front, the SBI chief said.
The fall in profit came in even as the bank made 19 per cent lower provisions at Rs.2,266 crore during the reporting quarter. Mr. Chaudhuri said agri and SME assets did not require higher provisioning.
SBI shares were battered on the Bombay Stock Exchange as the shares lost 5 per cent intra-day before ending the day lower by 3.41 per cent.