SBI net rises 12% asset woes hammer stock
State Bank of India (SBI), the country’s largest lender, reported a net profit of Rs 2,810 crore for the quarter ended September 30, a 12 % rise compared with the Rs 2,501-crore net profit in the year-ago period.
Pratip ChaudhuriThough the banking behemoth reported a growth in profit after two quarters, investors were not impressed, since the bank also saw a rise in its non-performing assets (NPAs). SBI’s stock took a beating, ending nearly seven % lower on the bourses from its previous close, while the broader indices were down 1.18 %.
The bank’s gross non-performing asset ratio rose to 4.19 % as on September 30, compared with 3.35 % a year ago, while the net NPA ratio rose from 1.7 % to over two %.
In the second quarter, the bank had made provisions for bad assets worth Rs 2,921 crore, a 35 % year-on-year rise. Chairman Pratip Chaudhuri said provisioning may continue to remain at elevated levels in the coming quarters, possibly close to Rs 2,500 crore. The Reserve Bank of India’s directive of higher provisioning for standard and sub-standard assets was also responsible for the rise in provisioning, Chaudhuri said.
The bank saw fresh slippages of Rs 8,000 crore during the quarter, while recovery, including upgradation, of loans stood at Rs 1,800 crore. Slippages from restructuring accounts stood at Rs 1,762 crore.
“We have almost stopped writing off loans, because following the write-off, recovery efforts may slacken. In the second quarter of the previous financial year, we wrote off Rs 662 crore of loans, while this quarter, the figure stood at only Rs 66 crore,” Chaudhuri said. Writing off bad assets helps banks reduce gross NPAs.
Chief Financial Officer Diwakar Gupta said sectors which saw stress were iron and steel, metals, and agro-based industries.
The growth in profit was primarily driven by a 33 % rise in net interest income and higher margins. The bank registered an all-time high net interest margin of 3.79 % in the July-September quarter, compared with 3.43 % in the year-ago period. SBI’s net interest margin from domestic operations crossed four %.
“We expect the margins to be around 3.65 % this year. In the first two quarters, loan growth was slack. But since October, we have seen some pick-up in loan growth,” Chaudhuri said, adding the bank expected loan growth of 16-18 % in 2011-12.
However, the bank’s non-interest income declined 14.43 %, owing to a drop in profit on investments, as it booked a marked-to-market loss of nearly Rs 500 crore on its equity portfolio. The bank has also not taken any dividend income from its subsidiaries, unlike in the year-ago period.
SBI, in dire need of capital infusion, saw depletion of its Tier-I capital, which declined to 7.47 % as on September 30, compared with 7.6 % as on June 30. The lender’s overall capital adequacy ratio also fell from 11.6 % to 11.4 %. “The government has assured us of capital infusion of nearly Rs 4,000 crore during this financial year. We see our Tier-I capital adequacy ratio improving to nine % by March-end,” Chaudhuri said.
Processing your request, Please wait....
