The Telegraph
Saturday , November 10 , 2012
Since 1st March, 1999
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Asset worry spoils SBI show

Mumbai, Nov. 9: The State Bank of India (SBI) today beat analyst expectations by reporting a 30.16 per cent growth in net profit at Rs 3,658 crore in the second quarter ended September 30, but concerns over its asset quality swirled once again as its bad loans swelled.

The country’s largest bank had reported a net profit of Rs 2,810 crore in the same quarter a year ago. Brokerages such as Kotak Institutional Equities had forecast a net profit of Rs 3,474 crore.

Provisions during the quarter fell sharply to nearly Rs 1,826 crore from Rs 3,386 crore in the same quarter of last year, boosting profits.

The bank’s core income, represented by the net interest income (NII), disappointed as it stood at Rs 10,974 crore against Rs 10,482 crore last year. NII is interest earned minus interest paid out by a bank.

However, it was the bank’s asset quality that caused the greatest disappointment. Gross non-performing assets (NPAs) jumped to Rs 49,202.46 crore from Rs 33,946.31 crore in the same period last year and Rs 47,156 crore in the first quarter of this fiscal. This resulted in the percentage of gross NPAs rising to 5.15 per cent from 4.19 per cent last year.

There were some positives such as fresh NPAs coming down to Rs 8,495 crore from Rs 10,844 crore in the previous quarter, apart from an improvement in cash recovery and more upgradation of NPA accounts during the period. But analysts said the quarter was also marked by higher instances of restructuring.

During the period, SBI restructured accounts worth Rs 4,700 crore compared with Rs 600 crore in the preceding quarter. “Higher recovery/upgradation was definitely positive but sustaining this kind of run-rate in the future will be difficult,” said Saday Sinha, banking analyst at Kotak Securities.

Concerns over bad loans spilled over to the stock market where investors pummelled the stock, which plunged 4 per cent, or Rs 87.20, to close at Rs 2,156.35.

SBI chairman Pratip Chaudhuri said the bank had been successful in bringing down cases of fresh NPAs. He said most of the loan defaults came from sectors such as mid-corporates, SMEs and agriculture.

The quarter saw gross advances rising to Rs 9,56,000 crore from Rs 8,10,612 crore with retail advances increasing to Rs 1,91,760 crore (Rs 1,68,762 crore).

Home loans leapt 13 per cent to Rs 1,08,381 crore.

According to Chaudhuri, the bank’s aggressive interest rate offerings in home loan (it now provides the cheapest housing loans) had resulted in a sharp jump in this book.