SBI Q4 profit doubles to Rs 2,815 cr; find out how

State Bank of India (SBI) more than doubled its net profit to Rs 2,815 crore in the March 2017 quarter, on the back of lower provisions. Provisions were lower by 11% year-on-year (y-o-y) at Rs 11,740 crore, of which those for bad loans fell 10% y-o-y to Rs 10,992 crore. The profits came off a small base — in the March 2016 quarter provisions for non-performing loans had soared following the asset quality review (AQR). SBI’s asset quality improved in the March quarter, with gross NPAs as a percentage of gross advances falling 33 bps sequentially to 6.9%. The net NPA ratio also witnessed a quarter-on-quarter (q-o-q) decline of 53 bps.

SBI chairman Arundhati Bhattacharya said on Friday there had been progress on keeping stressed assets in check. “The accretion of NPAs seems to be slowing,” Bhattacharya said. Shares of SBI rose as much as 4% on the BSE in intra-day trade on Friday, before ending at Rs 276.26, up 0.15%. So far in 2017, the SBI stock is up 23.4% against a 14.42% rise for the Sensex in the same period. India’s largest lender reported a 13% year-on-year (y-o-y) growth in operating profit in Q4 FY17 at Rs 16,026 crore.

SBI’s net interest income — the difference between interest earned and interest expended — grew 17.34% y-o-y to Rs 18,071 crore and the NIM — a key measure of profitability – fell 16 basis points (bps) y-o-y to 3.11%. The lender’s capital adequacy ratio (CAR) fell 1 basis point sequentially to 13.11% in Q4. Bhattacharya observed that while the Reserve Bank of India (RBI) had eased norms for decision-making at the Joint Lenders Forum (JLF), it was difficult to say to what extent this would help. “The rules were eased as it was found many of the smaller banks, or perhaps one or two of the bigger banks, were dragging their feet,” she explained.

In Q4FY17, of the total slippages of Rs 9,755 crore into the bad loan category, 13% originated from the restructured book. In Q4FY16, SBI had created a watch-list of accounts worth Rs 31,352 crore and expected 70% of it to slip into the non-performing category in a worst-case scenario. The list stands at Rs 13,310 crore following fresh slippages in the March quarter. However, the post-merger watch-list stood at Rs 32,427 crore as on April 1. Following the merger, the bank has more power loans as part of its watch-list at Rs 11,075 crore, almost five times its standalone loans in the March quarter.

Recoveries in Q4 FY17 were at Rs 1,203 crore and the bank also upgraded loans worth Rs 1,002 crore from non-performing to standard. SBI reported loan growth of Rs 7.8% y-o-y to Rs 16.27 lakh crore in Q4 FY17 and its total deposits grew 18.14% y-o-y to Rs 20.44 lakh crore in the same period. While the bank’s corporate loans have grown 3.59% y-o-y, its investment in corporate bonds have 45% y-o-y to Rs 59,636 crore and investment in commercial papers more than quadrupled on a y-o-y basis to Rs 58,651 crore. Net profit of SBI Group — banking and non-banking subsidiaries — declined to Rs 241 crore in FY17 from Rs 12,225 crore in FY16.

From the June quarter of FY18, the bank would announce its consolidated results since the merger is effective April 1. “In respect of the merger of the associates, we have ensure that we have taken the maximum pain so that going forward we can give much better results. And towards that end, the entire corporate book has been fully aligned,” she said. Bhattacharya added voluntary retirement scheme (VRS) expenses that come within Q4 to the extent of 75% of the estimated expenses have already provided for.