SBI net grows 30% on lower provisioning

Riding on lower provisioning towards bad loans and better management of credit, State Bank of India (SBI) reported a 30.16 per cent year-on-year (y-o-y) growth at Rs 3,658.14 crore in net profits for the September quarter as against Rs 2,810.43 crore in the corresponding period of last year.

However, pre-provisioning profits slipped 1.6 per cent y-o-y to Rs 7,474 crore, signalling pressure on the top line which grew just 5.3 per cent y-o-y to Rs 10,974 crore.

Gross NPAs rose 18 basis points sequentially to 5.15 per cent while net NPAs were up 22 basis points to 2.44 per cent. The weak set of numbers, together with the deteriorating asset quality, sent the SBI stock crashing 3.89 per cent on the BSE on Friday to Rs 2,156.35.

SBI chairman Pratip Chaudhuri attributed the lower provisions to the bank having contained the accretion of NPAs as also front-loading provisions for accounts like Kingfisher Airlines. Provisions fell 37 per cent y-o-y and 34 per cent sequentially. The bank's balance sheet saw more toxic assets as gross NPAs were up by around Rs 2,000 crore to Rs 49,202 crore while the quantum of restructured assets jumped to Rs 4,694 crore from Rs 560 crore in the June quarter.

The bank said there was a pipeline of Rs 4,000 crore worth of assets that may need to be restructured in the October-December quarter. SBI's provision coverage ratio at the end of September was 62.78 per cent. Chaudhuri said SBI's NII remained muted because the bank's loan growth had somewhat slowed, particularly in the mid-corporate and SME segments. Its loan book grew 17.94 per cent y-o-y to Rs 8.1 lakh crore in the quarter. The bank believes loan growth this year will be 16-18 per cent.

The key profit criterion, the net interest margin (NIM), which is the difference between the cost a bank incurs on deposits and the yield it receives by lending it in terms of interest, stood at 3.77 per cent for domestic operations and 3.45 per cent at the entity level. In the same period last fiscal, NIM stood at 4.09 per cent in the domestic business and 3.81 percent for the group. "We are confident of maintaining NIM above 3.75 per cent in the current fiscal," Chaudhuri said, adding that lowering of deposit rate will support the improvement in margin.

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