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Q1 Results: SBI Swings To Profit But Misses Forecast

SBI reported a net profit of Rs 2,312 crore in the quarter ended June against a loss of Rs 4,785.8 crore a year ago.

A customer uses an automated teller machine (ATM) at a State Bank of India Ltd. (SBI) branch at night in Bengaluru, India. (Photographer: Karen Dias/Bloomberg)
A customer uses an automated teller machine (ATM) at a State Bank of India Ltd. (SBI) branch at night in Bengaluru, India. (Photographer: Karen Dias/Bloomberg)

State Bank of India reported a profit in the quarter ended June on lower provisions, but it missed analysts’ estimates.

Net profit stood at Rs 2,312 crore in the June quarter compared with a loss of Rs 4,785.8 crore in the year ago period, SBI said in an exchange filing. That’s lower than the Rs 4,105-crore consensus estimate of analysts tracked by Bloomberg.

Net interest income, or core income, rose 5 percent year-on-year to Rs 22,939 crore—in line with the Rs 23,274-crore estimate.

SBI’s gross non-performing asset ratio in the first quarter remained unchanged at 7.53 percent over the preceding quarter. Its net bad loan ratio stood at 3.07 percent against 3.01 percent as of March. SBI’s provisions for bad loans fell to Rs 9,183 crore from Rs 16,501 crore in the quarter ended March. Its provision coverage ratio—an indicator of balance sheet strength—stood at 79.3 percent. A provision coverage ratio of about 70 percent is considered healthy.

The core operating numbers were in line with the street’s expectations, said Ravikant Anand Bhat, research analyst (banking) at IndiaNivesh. “However, the biggest surprise is the gross slippages, which is almost two times of what we were estimating,” he told BloombergQuint.

Agreed Aalok Shah, research analyst at Monarch Networth Capital. The slippages, he said, were a “disappointment”. While the slippages looked a bit elevated, he said, a sequential decline in gross bad loan numbers reflects the recovery upgradation and some write-offs.

What Led To Higher Slippages

“One regular account of a Maharatna company, which slipped into NPA books of another bank further impacted the gross slippages,” Rajnish Kumar, chairman at the state-run lender, said in a media statement. “One bank did not successfully implement the resolution plan fully on time. This account added about Rs 2,000 crore to the slippages, but the situation can be corrected.”

Also, the agriculture loan portfolio where debt waiver issues emanating from just one state contributed around Rs 2,000 crore to the slippages, he said.

Managing Director PK Gupta, however, said the lender neither had higher exposure nor did it witness an increase in bad loans in its Rs 11,500-crore auto dealer financing portfolio since March.

Every quarter I am looking at the sky and praying to God that the three large NCLT accounts stuck in the middle of resolution get resolved. But these alone will give us more than Rs 16,000-crore write-back.
Rajnish Kumar, Chairman, SBI

Earlier this month, Chairman Kumar had said he expects higher recoveries from bad loan accounts to improve SBI’s performance in the second half of this fiscal.

Key Highlights

(Quarter-On-Quarter)

  • Gross slippages stood at Rs 16,212 crore versus Rs 7,505 crore.
  • Domestic net interest margin at 3.01 percent against 2.95 percent.
  • Loans grew at 13.8 percent year-on-year and deposits at 7.17 percent.

Shares of SBI fluctuated between gains and losses to trade flat at Rs 317 apiece after the results announcement. That compares with a 0.4 percent gain in the benchmark Nifty 50 Index. The stock has gained around 6.7 percent so far this year.

Q1 Results: SBI Swings To Profit But Misses Forecast