SBI net profit boost by favorable NPA provisions during Q3

A healthy improvement in asset quality and a drastic dip in loan loss provisions helped State Bank of India, which controls over two-fifths of the nation's banking system, Friday report a consolidated net income of Rs 4,709.15 crore for the December quarter as against a net loss of Rs 1,886.57 crore a year ago. On a standalone basis, the nation's largest lender booked a net profit of Rs 3,955 crore compared to a net loss of Rs 2,416.37 crore in the year-ago period.

"The December quarter performance shows excellent improvement in all parameters, including profit, business growth and asset quality," chairman Rajnish Kumar told reporters in a council this afternoon. Showing better asset quality, the gross non-performing assets ratio came down to 8.71 from 10.35, while the net NPA ratio also improved to 3.95 from 5.61.

Total provisions fell 39 per cent to Rs 8,670 crore in the quarter from Rs 14,171 crore in the same period last year. Accordingly, loan loss provisions came down to Rs 13,971 crore, down 21.33 per cent, from Rs 17,760 crore.

Reflecting the overall improvement in credit off-take, net interest income grew at a healthy 21.42 per cent to Rs 22,691 crore year-on-year, helping the bank report improved domestic margins at 2.92 per cent from 2.67 per cent. Kumar said there are eight stressed accounts, including three from the power sector, that is in the very advanced stage of resolution.

"If all these accounts get resolved in the next two months, then we are looking at a situation where our gross NPAs will slip below 7 per cent and net NPA to under 3 per cent." The bottom line was helped by lower fresh slippages too which declined to Rs 4,523 crore in the quarter as against Rs 25,836 crore. The bank sold Rs 1,354 crore of bad loans to asset reconstruction companies during the quarter.

The provision coverage ratio improved by 871 basis points to 74.63 from 65.92 a year ago, the chairman said. Kumar said an effort is on to resolve cash-strapped Jet Airways to which it has over Rs 1,500 crore exposure as the lead banker.

"We are working on a resolution plan. Under the Project Sashakt, Jet Airways would be the first case to be taken under the resolution," he said. The bankers are working on a resolution by converting their Rs 8,200 crore loans into equity, which will see the lenders owning around 30 per cent of the airline.

In a big relief to the crippled mortgage lender DHFL, which has been accused by the news portal Cobrapost of syphoning off around Rs 31,000 crore of public funds, Kumar said there is no worry for the bank. The bank has an exposure of over Rs 11,000 crore to the third largest pureplay mortgage lender, according to the Cobtapost report.

"When IL&FS defaulted, all NBFCs, particularly DHFL, came under pressure and we reviewed everything in terms of liquidity, and cash available with them to service their debt. As of now we don't have much concern, but we are keeping a close watch on the DHFL account," Kumar said.

On the crippled IL&FS group, which owes the system over Rs 94,000 crore, he said SBI has exposure of Rs 900 crore at the holding company level, as well as Rs 2,200 crore at some of the special purpose vehicles. At the holding company level, accounts have slipped to NPAs and SBI has made an accelerated provision of 50 per cent as against the mandated 15 per cent. But at the SPV level, the accounts are performing and cash-flows are coming in.

Overall deposits grew 6.76 per cent to Rs 28.30 lakh crore from Rs 26.51 lakh crore, while overall advances rose 11.99 per cent to Rs 21.55 lakh crore from Rs 19.24 lakh crore. The bank may look at selling a stake in SBI Card and SBI General Insurance in the next financial year, Kumar said. The SBI counter slipped 3.09 per cent to Rs 284.30 on BSE which closed with a 0.59 per cent gains.