State Bank of India (SBI) reported its biggest ever quarterly loss of ₹7,718 crore in the three months ended March 31 due to provisions made for losses in its bond portfolio and for bad loans.
This is the second consecutive quarter that the country’s largest lender has posted a loss. In the Oct.-Dec. quarter, the bank had a loss of ₹2,416 crore while the loss in the fourth quarter of 2016-17 was ₹3,442 crore. The numbers are not exactly comparable on a year-on-year basis, since the lender merged all five associate banks and Bharatiya Mahila Bank at the start of 2017-18.
The bank has set aside ₹24,080 crore as provision for bad loans and ₹4,761 crore for investments, mainly in its bond portfolio.
“Let me confirm that the recognition [of bad loans] is completed,” SBI chairman Rajnish Kumar said at a post earnings press conference.
He pointed to the ‘strength’ of the balance sheet with the loan loss coverage ratio having improved by almost 500 basis points (bps) to 50.38% in one year. “Our capital position is also strong,” he said.
The bank’s capital adequacy ratio was 12.6% as on March 31, including tier-I capital of 10.36%.
‘Worst is over’
“The worst is over for SBI,” said A.K. Prabhakar, head of research at IDBI Capital in Mumbai, adding that the March quarter results were largely on expected lines and the bad loan additions had been smaller than feared.
SBI rose 3.7% on the BSE to close at ₹254.15, while the Sensex ended little changed.
“Last year [2017-18] was disappointing. There is hope this year. FY20 will be a year of happiness,” Mr. Kumar said, indicating he expects the benefits from a turnaround at the bank to start accruing from the next financial year. SBI reported gross NPA of 10.91% at the end of March, which is 56 bps higher than the preceding quarter. It aims to pare gross NPA to below 6% by March 2020.
Last quarter, ₹29,037 crore of loans slipped into the NPA category, of which ₹17,435 crore was from stressed standard assets category.
The other factor contributing to SBI’s confidence in improving its performance is that the resolution of stressed assets has started, resulting in banks recovering loans.
Last week, lenders successfully sold Bhushan Steel — that was referred for bankruptcy following default — to Tata Steel. SBI has recovered 72% of the loans given to the steel company from the sale.
SBI has an exposure of ₹49,116 crore for the 12 companies against which bankruptcy proceedings were initiated by banks, after being identified by the Reserve Bank of India for action under the Insolvency and Bankruptcy Code. SBI has made a provision of 56% on these accounts and expects to take 52% haircut on these accounts, Mr. Kumar said.
There is also a second list of accounts, where SBI has an exposure of ₹28,510 crore and has made 63% provisioning.
However, proportion of haircut from these accounts is expected to be higher, a bank official said.
SBI expects resolution of the first list of accounts that was referred to the NCLT by the end of September, and for the second list by the end of the financial year.
“Resolution of NCLT accounts will lead to lower GNPAs, in addition to better margins,” SBI said in a presentation to the investors.
SBI said it has redefined the segment that lends to large corporates, which will now comprise of only AA rated companies. The lender expects loan growth to be 10% and sees deposit growth at 9% this fiscal.
( With Reuters inputs )
