SBI associates register combined loss of Rs3,096 cr in Q2

State Bank of India (SBI), which carries the heaviest load of non-perforning loans, is further constrained by its five associate banks reporting a combined loss of Rs3,096 crore in the second quarter ended September 2016, on a sharp rise in provisions for stressed loans.

State Bank of Patiala (SBP) reported the highest loss in Q2 FY17 of Rs1,340 crore, followed by State Bank of Hyderabad (SBH) at Rs776 crore. The provisions and contingencies, including the amount set aside for non-performing loans, grew five times to Rs6,679 crore in Q1 FY17 from Rs1,235 crore in Q2 FY16.

In fact, SBI plans to infuse Rs2,400 crore in SBP to meet CAR norms ahead of its merger.

The figure is arrived at on an alignment of weak and bad loans on the books of associates of the SBI group ahead of the proposed merger with the parent.

These banks had collectively reported a net profit of Rs870 crore in the similar quarter of the previous fiscal (July-September 2015-16).

SBI claims that the asset quality at its subsidiaries are substantially different from its own and chairman Arundhati Bhattacharya had predicted worse quarter ending September 2016 for the five associates.

She was signaling that at the end of the merger process, something that is stressful with the subsidiaries will become more stressful for SBI.

While a part of the loan loses impacted first quarter profits, the remaining were carried forward to the second quarter and some more will be carried further into the third and fourth quarters.

State Bank of India is targeting the merger its five subsidiary banks – SBH, SBP, State Bank of Jaipur and Bikaner (SBBJ), State Bank of Mysore (SBM) and State Bank of Travancore (SBT) - in year ending March 2017.