SBI third quarter net more than doubles to R2,610 crore

State Bank of India (SBI) has more than doubled net profits in the December 2016 quarter to R2,610 crore. Profits were buoyed by treasury profits and the proceeds of R1,755 crore that came in from the sale of a 3.9% stake in its life insurance arm, SBI Life. SBI’s other income jumped 59% year-on-year to R9,662 crore with the profits on sales of investments trebling to R3,969 core and a 14% rise in fee income to R4,011 crore. The profits came off a small base — in the December 2015 quarter, provisions for non-performing assets (NPAs) had soared following the asset quality review (AQR).

The SBI share rose as much as 2.4% on the BSE in intra-day trade, before ending at R276.26, up 0.15%. So far in 2017, the SBI stock is up 10.61% against a 6.4% rise for the Sensex in the same period.

India’s largest lender reported a 30.7% y-o-y growth in operating profit in Q3FY17 at R12,543 crore. SBI’s net interest income — the difference between interest earned and interest expended — grew 7.7% y-o-y to Rs 14,752 crore and its net interest margin — a key measure of profitability — fell 19 basis points (bps) y-o-y to 3.03%. Its capital adequacy ratio (CAR) rose 61 bps sequentially to 13.73% in Q3.

SBI’s asset quality deteriorated in the December quarter, with gross NPAs as a percentage of gross advances rising 9 bps sequentially to 7.23%. The net NPA ratio also witnessed a quarter-on-quarter rise of 5 bps. The largest chunk of NPAs came from the mid-corporate segment, which reported a gross NPA ratio of 20.82%, followed by large corporates at 8.7%.

SBI chairman Arundhati Bhattacharya said on Friday that while she was hopeful of recoveries of loans in the current quarter, demonetisation has delayed it. “Demonetisation has actually put us back by a quarter, so we are working very hard, but I do not know if they can come in this quarter or they will spill over to the next year,” Bhattacharya said.

The proceeds of Rs 1,755 crore from the SBI Life stake sale have been set aside as provisions against stressed standard assets. “So going forward we are well prepared,” the chairman said.

Of the total slippages of Rs 10,185 crore into the bad loan category, 73% originated from the watch list. “Our outlook of Rs 40,000 crore of slippages for this year does not look like it is coming down but from next year, definitely things will start looking better,” Bhattacharya explained.

In Q4FY16, SBI had created a watch list of accounts worth Rs 31,352 crore and expected 70% of it to slip into non-performing category in a worst-case scenario. The list stands at Rs 17,992 crore following fresh slippages in the December 2016 quarter. Recoveries in Q3FY17 were at Rs 1,003 crore and the bank also upgraded loans worth Rs 1,059 crore from non-performing to standard.

SBI reported loan growth of Rs 4.8% y-o-y to Rs 14.97 lakh crore and its total deposits grew 22.1% y-o-y to Rs 20.40 lakh crore in the same period. The bank has received Rs 1.8 lakh crore in demonetisation deposits, of which Rs 1.33 lakh crore were in savings accounts, Rs 37,000 crore in current accounts and Rs 10,000 crore in term deposits.

“Overall, as I said, retail is growing very well and if you see the numbers there, retail growth is about 18%. The growth in the corporate book is very low and though it should pick up in the last quarter, we would like to be cautious. So overall we are not expecting to go above 6.5% for the full year,” Bhattacharya said.

According to her, while domestic advances stood at Rs 12.11 lakh crore, investment in commercial paper has gone up to Rs 45,000 crore from Rs 33,000 crore in the December quarter of FY16, a growth of 36%. “In corporate bonds too there has been a growth of 18% where we have gone up from Rs 41,000 crore to Rs 48,000 crore in Q3FY17,” she added.