Customers enter a State Bank of India Bank (SBI) branch in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)

Q1 Results: SBI Reports Loss For The Third Straight Quarter

State Bank of India, the country’s largest lender, reported a surprise loss for the third straight quarter.

The public sector bank’s loss stood at Rs 4,875.8 crore in the quarter ended June, according to its exchange filing. That compares with Rs 238-crore profit pegged by analysts tracked by Bloomberg. SBI had reported its largest ever quarterly loss of Rs 7,718 crore in the March-ended quarter. It had earned a profit of Rs 2,006 crore a year ago.

“The net loss is largely attributable to lower trading income and significant mark-to-market losses due to hardening of bond yields,” the bank said in its statement. The bank hasn’t availed the benefit of RBI dispensation to spread the mark-to-market losses on available-for-sale and held-for-trading portfolio, according to the statement. It recognised a Rs 5,893-crore loss on investments.

Net interest income, or the core income from operations, of the bank rose 24 percent year-on-year to Rs 21,798 crore. That’s higher than the consensus forecast of Rs 19,916 crore. Net interest margin stood at 2.95 percent.

On Track To Meet 2% Credit Cost Guidance

Provisions for bad loans stood at Rs 19,228 crore compared with Rs 28,096 crore in the previous quarter and Rs 8,929.4 crore a year ago.

“The provisioning is largely attributable to the accounts that have been referred to India’s bankruptcy courts and some write-back can be seen in the future,” Avinash Gorakshakar of Joindre Capital Services told BloombergQuint.

While the bank holds excess provisions (71 percent cover) on its exposure to accounts under the Insolvency and Bankruptcy Code, its overall provision coverage ratio improved 300 basis points sequentially to 69.25 percent.

The bank intends to further improve its overall provision cover in the three months to September. It will also have to make additional provisions towards gratuity and specific power accounts. This can keep credit costs elevated till December, cautioned Rajnish Kumar, chairman of SBI.

“All provisions have been absorbed in June so that there is no hangover of credit costs by December,” Kumar said, adding the bank is on track to meet its guided cost of 2 percent for the ongoing financial year.

Asset Quality Stabilises

The lender’s asset quality stabilised in the April-June period after deteriorating for the previous two quarters.

The gross non-performing loans as a percentage of total advances stood at 10.69 percent as of June against 10.9 percent in the preceding quarter. The net non-performing advances ratio declined to 5.29 percent from 5.73 percent in the previous quarter.

The lender’s watchlist account, including special mention category (1 and 2) loans fell 15 percent to Rs 24,633 crore.

“One large textile account of Rs 2,000 crore slipped during the quarter,” Kumar said. While the bank has assets worth Rs 17,000 crore in the power sector, Kumar said he expects resolution in at least seven of these this month.

SBI has a provisions cover of 40 percent on these power accounts but expects a recovery rate of 50 percent.

As far as this quarter’s growth is concerned, nothing is coming from banks under prompt corrective action framework, Kumar said.

Agricultural Loans Add To Woes

Fresh slippages during the June quarter also came off to Rs 9,984 crore from Rs 33,670 crore in the January-March period.

Kumar said 91 percent of the corporate slippages came from within the watchlist. Slippages from agriculture and small and medium enterprise portfolios contributed nearly 63 percent of the total watchlist, he added.

While the bank didn’t flag off any concerns about its SME book, Kumar said they were being impacted by loan waivers announced in Maharashtra and Karnataka. “We have to live with certain level of agri-NPAs.” Agri-NPAs can continue to be a pain point for the bank, Kumar said.

Business Growth

Advances rose 4 percent to Rs 18.75 lakh crore, led by a 14 percent increase in domestic retail advances. The management attributed this to organic growth. Advances to the corporate segment grew 5.1 percent year-on-year.

Slower growth in overall advances is attributed to buyers’ credit impact of Rs 45,000 crore. Deposits increased 5.6 percent from last year to Rs 27.5 lakh crore. Current and savings account deposit ratio stood at 45.07 percent.

Other Highlights

  • Recovery from written-off accounts rose to Rs 2,426 crore from Rs 712 crore last year.
  • The bank has identified nine offices for closure in this financial year.

Shares of the state-owned lender today closed nearly 4 percent down at Rs 304.5 apiece on the BSE. Intra-day, the scrip fell as much as 5.1 percent, the most in over six months.