SBI Q3 profit soar 41% on lower provisions, bad loan recoveries

Mumbai: The country's largest lender State Bank of India (SBI) on Friday reported a 41 per cent jump in consolidated net profit to Rs 6,797.25 crore in the October-December quarter compared to Rs 4,823.29 crore in the year-ago period, helped by recovery in bad loans and lower provisions.

On the standalone basis, the lender reported a 41.18 per cent increase in its net profit to Rs 5,583 crore - its highest ever quarterly profit - for the December quarter, driven by improvement in asset quality and strong interest income.

It had reported a net profit of Rs 3,955 crore in the quarter ended December 2018.

"It has been very strong operating performance for SBI in terms of profitability, asset quality, the provision coverage ratio and capital adequacy," SBI Chairman Rajnish Kumar told reporters in a conference call after the announcement of the results.

The bank has seen a strong growth in deposits and retail advances including personal, agriculture, housing and small businesses, he said.

Net interest income grew by 22.42 per cent to Rs 27,779 crore from Rs 22,691 crore. Its recovery from Essar Steel was Rs 11,000 crore which helped NII.

Domestic net interest margin (NIM) improved by 62 basis points to 3.59 per cent from 2.97 per cent.

Gross non-performing assets improved to 6.94 per cent from 8.71 per cent while net NPAs stood at 2.65 per cent as against 3.95 per cent.

Fresh slippages in the quarter spiked to 16,525 crore from Rs 4,523 crore in the year-ago period, on account of mortgage lender- Dewan Housing Finance (DHFL).

The bank has a loan exposure of Rs 7,100 crore and also invested Rs 2,900 crore in the bonds issued by DHFL. It has made a mark-to-market provision of 50 per cent on investments in bonds and 20 per cent on its loan exposure to DHFL.

"The overall provision for bonds and loans (to DHFL) is 29 per cent. In the March quarter, based on the progress of the resolution and the overall assessment about the recovery, we will provide whatever is required," Kumar said.

He said the DHFL has been red-flagged by the bank and it is waiting for the transaction audit report, being conducted by the administrator of the housing finance company, to decide on further course of action.

"Going forward, there are no big ticket loans in sight which is likely to slip and corporate slippages are very much under control. Retail slippages other than agriculture and partially to small businesses are very much under control," he said.

Kumar said in the fourth quarter of FY20, slippages in corporate book are not going to exceed Rs 1,200 crore and the total slippage would be around Rs 5,000-6,000 crore.

He said the states wherever farm debt waivers have been announced, the recovery and renewal performance have been impacted.

"I believe that in this (Q4) quarter, agriculture sector will also be completely taken care of. We are expecting some clarifications and guidelines from the RBI, relating to agriculture," he said.

Total provision increased by 45.78 per cent to Rs 12,639 crore from Rs 8,670 crore in the year-ago period.

The recovery and upgradation stood at Rs 13,553 crore. The lender is expecting a recovery of Rs 7,000 crore during the current quarter. It sold Rs 960 crore of NPAs to asset reconstruction companies.

Capital adequacy ratio (CAR) improved to 13.73 per cent as on December 2019, an increase of 96 basis points year-on-year. Deposits grew by 9.92 per cent and advances grew at 6.79 per cent.

Kumar said he expects loan growth to be 8-10 per cent in FY20. "Selflessly if you pray to god, your prayers get answered. If you ask me, it will be the credit growth. My wish list is that we do better as far as the corporate credit growth is concerned and the demand revival in the economy happens," Kumar said. The bank's scrip closed at Rs 318.55, up 2.53 per cent on BSE which closed at 40,723.49 on Friday.