SBI reports Rs945-cr Q2 net profit, first in four quarters

State Bank of India (SBI) has reported a net profit of Rs945 crore for the July-September 2018-19 quarter, its first quarterly profit in four quarters, as bad loan provisions fell and asset quality improved.

SBI, the country’s biggest lender, however, registered a 40.3 per cent fall in profit from Rs1,581.55 crore in the corresponding period a year ago.
Provisions for bad loans fell 39.1 per cent from a year ago to Rs10,185 crore while additions to bad loans slowed in the quarter, pushing the overall bad-loan ratio down.
Net interest income, or the core income of the bank, rose 12 per cent year-on-year to Rs20,905 crore, lower than the consensus forecast of Rs21,355 crore. Normalised net interest margins widened to 2.76 per cent from 2.67 per cent in the previous quarter.
In fact, SBI’s profits were boosted by a one-time gain of Rs1,087.4 crore from the sale of investments in its general insurance business and merchant banking business.
“Though the profit is modest, there is no looking back,” said Chairman Rajnish Kumar at the press conference. “From here on, this number will only be bigger and better,” said Kumar reiterating his belief that a pick-up in resolution of stressed accounts will help improve profitability for corporate lenders.
During the quarter, SBI's gross non-performing assets stood at 9.95 per cent of advances compared with 10.69 per cent last quarter. Net NPAs stood at 4.84 per cent against 5.29 per cent earlier.
The slippage ratio for the bank, which reflects the proportion of advances turning bad during the quarter, fell to 2 percent. This was the lowest in six quarters, said the bank.
“We have complete control over the demon of NPA,” Kumar said.
However, there was an increase in slippages in the retail and SME portfolio. The book of small and medium enterprise loans saw increased slippage as a dispensation provided by the Reserve Bank of India to these firms expired in the September-ended quarter.
Going ahead the bank expects some relief from the first list of accounts referred to the National Company Law Tribunal (NCLT). Among those twelve accounts, Essar Steel is close to resolution. “We will see a Rs6,000 crore write-back from one of the NCLT-1 accounts,” Kumar said.
The bank has made provisions of Rs56 crore against its exposure to the IL&FS group. The lender’s exposure is to operational special purpose vehicles (SPVs).
Domestic advances rose 11 per cent, with the corporate loan portfolio growing the fastest. Corporate loans rose 14.3 per cent over last year. Retail advances, including SME, agriculture and personal advances, rising 8.9 per cent.
Deposits rose 7 percent, with domestic current account and savings account deposits rising 8.55 per cent.
The stock closed 3.5 per cent higher at to Rs295.30 apiece after the earnings announcement, SBI’s share price has fallen 10.43 per cent over the last one year.