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Asset relief in SBI profit damper

Calcutta, May 23: The State Bank of India today reported a 7.83 per cent dip in net profit for the fourth quarter ended March 2014 but showed an improvement in its asset quality that sent its stocks soaring by more than 9 per cent.

The net profit of the country’s largest lender stood at Rs 3,041 crore against Rs 3,299 crore in the corresponding quarter of the previous fiscal. For the 2013-14 fiscal, the bank’s net profit stood at Rs 10,891 crore, lower than Rs 14,105 crore in 2012-13.

“We have made a large provision on stressed loans and also made provisions for income tax. These provisions have eaten into our operating profit,” SBI chairman and managing director Arundhati Bhattacharya said here today.

The total provision of the bank increased 70 per cent to Rs 7,587 crore during the quarter, while provision for bad loans increased 48.05 per cent to Rs 5,884 crore. The higher provisioning took a toll on the operating profit, which otherwise registered a 36.95 per cent growth during the quarter at Rs 10,628 crore over the year-ago period.

Net interest income of the bank increased 16.47 per cent to Rs 12,903 crore in the fourth quarter, aided by a 16.84 per cent rise in interest income on advances.

On a quarterly basis, SBI was also able to lower its gross non-performing assets (NPAs) by 78 basis points and net NPAs by 67 basis points on the back of a conscious effort to control the asset quality.

As a percentage of advances, gross NPA stood at 4.95 per cent (4.75 per cent) and the net NPA at 2.57 per cent (2.10 per cent) during the quarter.

Fresh slips into bad loans were also lower during the fourth quarter at Rs 7,947 crore against Rs 11,438 crore in the previous quarter. The bank also recovered Rs 3,389 crore in the fourth quarter against Rs 1,538 crore in the previous quarter.

Bhattacharya said recovery was made in 2,783 accounts based on the findings of a committee to review NPA accounts.

“The committee had taken 1,092 meetings and reviewed 4,667 accounts, resulting in recovery and upgradation of 2,783 accounts. This indicates the amount of work that we are doing in NPA control to ensure that we have a much better understanding and differentiated strategies, wherever they are required, for upgradation and recovery,” she said.

Growth in advances to large corporate houses marginally decreased in 2013-14. Advances to large corporates grew 38.04 per cent in 2013-14 against a growth of 40.28 per cent in 2012-13.

Advances to small and medium enterprises (SME) , however, decreased 2.37 per cent in 2013-14 against a growth of 12.45 per cent a year ago. This helped the bank to lower its gross NPA in the sector to 25.1 per cent of the total gross NPA from 28.4 per cent a year ago.

SME review

“The SME portfolio was showing stress and we were not happy with the way the SME portfolio was going,” Bhattacharya said. She said based on the results of a pilot project the bank would be in a better position to improve the quality of its advances to the SMEs in the coming year.

“We were often been told by the regulator that while restructuring larger accounts, the smaller accounts were not getting similar treatment because the methodology was not well understood. All these will be resolved now,” Bhattacharya said.

The gross advances of the bank increased 15.44 per cent in 2013-14 to Rs 12,45,122 crore in 2013-14. The growth rate of advances was lower than 20.70 per cent in 2012-13.

The SBI scrip surged 9.69 per cent to Rs 2,755.25 on the Bombay Stock Exchange today as the bank’s results were above market expectations.

“The SBI reported a healthy performance on the asset quality front while operating performance came ahead of our estimates. Slippages for the bank came much lower than expectations. Recovery and upgrades came much higher,” said Vaibhav Agrawal of Angel Broking.

The bank has declared a dividend of 300 per cent, or Rs 30 per share, for 2013-14.

 
 
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