Lower Bad Loans Help SBI Return To Profit After 3 Quarters Of Heavy Losses

After three quarters of continuous losses, a massive one-time gain and better asset quality helped the SBI today report a consolidated net profit of Rs 576 crore for the September quarter, down 69 per cent y-o-y. The country's largest lender had posted a Rs 4,875.85 crore net loss in the previous quarter.

At the standalone level, net income fell 40 per cent to Rs 944.9 crore from Rs 1,581.55 crore on the back of better asset quality. A higher tax outgo of Rs 868 crore also led to a lower bottomline. The numbers would have been bad, had it not been for the one-time income of Rs 5,436 crore on part stake sale in SBI Life during the quarter.

For the lender, this comes as a big breather having been in the red for the past three quarters. In the June quarter, the bank made a loss of Rs 4,876 crore and also in the March 2018 quarter when it had reported its biggest-ever net loss of Rs 7,718 crore.

Investors lapped up the numbers as they were expecting heavy losses this time around as well. The SBI counter, which remained in the green throughout the day, closed with a gain of 3.45 per cent on the BSE at Rs 295.30, after scaling Rs 299.90 post-results, while on the NSE it was the best performer hitting Rs 300. Against this, the indices closed in the red with marginal loses in a choppy trade.

The management guided towards better days ahead as it expects credit cost or provisioning to continue to improve as the quality of its assets gets better. The bank is also hopeful of clocking better credit sales and further improving the margin.

State Bank of India (SBI) Chairman Rajnish Kumar told reporters in a con-call that the bank does not have an issue with its exposure to the troubled IL&FS group, which is only a little over Rs 4,250 crore -- to the group's a dozen or so special purpose vehicles, of which only one account is an NPA and has accordingly made a provision of Rs 56 crore. Of the total Rs 4,000 crore are to 12-14 SPVs and Rs 250 crore is the holding company.

Total consolidated income rose to Rs 79,302.72 crore in the quarter under review from Rs 74,948.51 crore a year ago, and standalone income rose to Rs 66,607.98 crore from Rs 65,429.63 crore.

Gross non-performing assets (NPAs) increased to 9.95 per cent from 9.83 per cent a year ago, while net NPAs improved to 4.53 per cent from 4.84 per cent. But, this is better than the June quarter performance when GNPA stood at 10.69 per cent.

In absolute terms the lender, which controls a little over 22 per cent of the system, reported net NPAs of Rs 94,810 crore down from Rs 99,263.3 reported in June quarter. In absolute, gross NPAs came in at Rs 2.05 trillion down from Rs 2.12 trillion in the previous quarter.

However, at Rs 10,888 crore, fresh slippages were better than anticipated and down from Rs 14,349 crore in the June quarter or down 159 bps. This had the bank making lower provision at Rs 10,381.31 crore, against Rs 16,842.18 crore in the year-ago period. Provision coverage ratio improved by 655 bps from 47.40 per cent as on September 2017 to 53.95 per cent as on September 2018, improved by 57 bps sequentially.

Provision coverage ratio (including Advance Under Collection Account AUCA) improved by 563 bps from 65.11 per cent to 70.74 per cent, up 149 bps sequentially, and the provision coverage ratio on NCLT List 1 and List 2 accounts stood at 64 per cent and 78 per cent, respectively. The bank said it still has Rs 20,359 crore of assets in the watch-list, which is down from Rs 22,289 crore in the previous quarter.

The core net interest income (NII) rose to Rs 20,905.7 crore from Rs 18,585.9 crore, the bank said. Domestic credit grew 11.11 per cent from Rs 16,00,546 crore to Rs 17,78,321 crore, while deposits grew 7.02 per cent from Rs 26,23,180 crore to Rs 28,07,420 crore.

Net interest margin (domestic) increased by 29 bps from 2.59 per cent to 2.88 percent. However, it declined by 7 bps sequentially due to interest income booked on NCLT resolutions in Q1. The bank said its average cost of deposits declined by 32 bps from 5.42 per cent to 5.10 per cent and by 1 bps sequentially from 5.11 per cent.

Domestic savings deposits grew 8.55 per cent to Rs 10,52,728 crore, while domestic current account deposits grew 6.05 per cent to Rs 1,74,076 crore and "the low-cost Casa deposits grew 8.19 per cent to Rs 12,26,804 crore.

Credit cost declined by 68 bps, which had a positive impact on the net interest income increased 12.48 per cent from Rs 18,586 crore to Rs 20,906 crore and interest income on loans increased 7.05 per cent from Rs 35,801 crore to Rs 38,326 crore. Non-interest income plunged 41.46 per cent from Rs 16,017 crore to Rs 9,375 crore mainly on account of a 72.69 per cent fall in trading income.

Recovery in written-off accounts registered a robust growth of 14.59 per cent from Rs 1,158 crore to Rs 1,327 crore. Domestic advances growth of 11.11 per cent was led by retail advances (including SMEs, agri & personal) which grew 8.91 per cent from Rs 9,48,479 crore to Rs 10,33,022 crore.

Personal loans grew by 14.23 per cent to Rs 5,76,594 crore, home loans grew 14.26 per cent to Rs 3,59,651 crore and auto loans and express credit increased by 8.27 per cent and 32.79 per cent, respectively, during the same period. SME advances grew 5.24 per cent to Rs 2,65,697 crore, and corporate advances grew 14.30 per cent to Rs 7,45,299 crore.