Mumbai: The country’s largest lender, State Bank of India (SBI), on Friday disappointed the Street, as it reported a net profit of Rs 2,312 crore for the June quarter, below analyst estimates, on flat growth in net interest income (NII) while its slippages shot up.
The lender had reported a net loss of Rs 4,876 crore during Q1FY19. On a quarter-on-quarter (QoQ) basis, SBI reported a 176 percent jump in profit against Rs 838.40 crore in the March quarter.
Its NII growth was flat sequentially at Rs 22,939 crore in Q1FY20 compared to Rs 22954 in Q4FY19. Similarly, non-interest income, or other income, fell 36 per cent to Rs 8,015 crore compared to Rs 12,685 crore in Q4FY19. The gross slippages, at Rs 16,212 crore, for the June quarter increased sharply by 62.38 per cent year-on-year (YoY) and 116.01 per cent sequentially. Hence, the slippage ratio rose significantly to 2.83 per cent in Q1FY20, from 1.39 percent in Q4FY19.
Despite sequential doubling of slippages the provisions were lower as more than 60 per cent of the loan loss provisions during 4QFY19 were due to increased provisioning requirements for NCLT accounts.
Provisions for bad loans fell significantly by 32.80 per cent QoQ to Rs 11,648.5 crore in Q1. The same declined 10.65 per cent YoY. While the NPAs in the corporate segment continued to decline, the NPAs in all other segments, including agri, SME and retail, were higher QoQ.
Consequently, sequentially stable gross non-performing asset ratio (GNPA) ratio was mainly driven by elevated write-offs. The GNPA was at 7.53 per cent down 316 basis points year on year. The net NPA ratio at 3.07 per cent was down 222 basis points YoY. The provision coverage ratio improved significantly by 1009 bps from 69.25 per cent as on June 2018 to 79.34 per cent as on June 2019.
Speaking at the earnings press conference, Rajnish Kumar, Chairman, SBI, said, “The balance sheet of SBI is Rs 23 lakh crore and stress is one percent… We aim to keep the total slippage ratio to below 2 per cent.”
The Domestic Net Interest Margin increased to 3.01 per cent in Q1FY20 compared to 3.02 per cent in Q4FY19. The domestic credit growth at 11.89 per cent year on year was driven by both retail loans as well as loans to high rated corporates.
