SBI net trebles on stake sale in JV

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New Delhi, Oct 25 (IANS) The country’s largest lender State Bank of Indias second-quarter (July-Sept) profit more than trebled pushed by the sale of stake in its life insurance subsidiary to Rs 3,102 crore and better asset quality and management.

“Exceptional items represent net profit of Rs 3,190.97 crore on sale of partial investments in SBI Life Insurance Company Ltd. Consequently, the holding of SBI in the subsidiary reduced to 75.9 per cent from 62.1 per cent,” SBI said.

Buoyed by the result, SBI share price was up 282.35. The largest lender also posted an improvement in its asset quality, amidst concerns over fresh weakness in corporate credit quality.

Net profit rose 218 per cent on a yearly basis to Rs 3,012 crore in the quarter ended September, according to an exchange filing as well as statement by India’s largest public sector bank. Profit growth though has come on a low base as SBI’s bottom line had taken a hit a year ago as it had to provide for bad loans or NPAs.

Net interest income, or the core income of the lender or for any bank, rose 17 per cent year-on-year to Rs 24,600 crore, surpassing the Rs 23,075-crore estimate. Net interest margin improved to 3.22 per cent from 3 per cent sequentially. The most soothing factor for SBI was that the asset quality has improved with gross non performing assets falling by Rs 6,827.89 crore to Rs 1,61,636 crore from June.

Gross slippages declined to Rs 8,805 crore from Rs 16,212 crore in the previous quarter, by 50 per cent. SBI chairman Rajnish Kumar, however, warned that a large stressed non-bank lender has not yet fallen into the NPA category and could add to stressed assets in subsequent quarters. He did not name the lender.

GNPA ratio decline to 7.19 per cent from 7.53 per cent, while the net NPA ratio fell to 2.79 per cent against 3.07 per cent as of June. Provisions for bad loans fell 5 per cent quarter-on-quarter to Rs 11,040 crore, but rose 8 per cent over a year earlier. The lender’s provision coverage ratio (PCR) stood at 81.23 per cent versus 79 per cent in the previous quarter.

Recovery/upgradation was at Rs 3,931 crore in Q2 compared to Rs 5.769 crore in the previous quarter. But there are three large accounts which are at an advanced stage of resolution with expected recovery of about 62 per cent. Credit cost for the quarter declined 8 basis points to 1.97 per cent. Gross slippages will not exceed 2 per cent even in worst scenario, Kumar said.

Details of asset quality across different segments showed that bad loan ratios across retail, SME and agricultural segments rose on a quarter-on-quarter basis. This was balanced out by a fall in bad loans in the corporate loan portfolio. During the quarter , the retail loan book (advances) grew at 19 per cent year on year (60 per cent of the whole Q2 loan), agri at 6.15 per cent,SMEs at 3.18 per cent , corporates at just 2.78 per cent.

Domestic credit growth stood at 8.43 per cent year-on-year, led by retail-personal loan advances. Corporate loan growth was muted at 2.7 per cent, which was attributed by Kumar, to lower utilisation of working capital limits.

There are three accounts which are at advanced stage of resolution with expected recovery of 62 per cent and there are 21 NPA accounts where ICA or Inter Creditor Agreement are signed or likely to be signed, chairman Rajnish Kumar said on a conference call on Friday. These NPA accounts have amounts involving Rs 26,536 crore.

There are 15 Standard accounts where ICA signed/ likely to be signed (Includes SMA or ASpecial Mention Accounts of Rs 9,001 cr) amounts to Rs 16,822 crore and this also includes stressed assets under the NBFC and HFC sector.

Deposit growth stood at 8 per cent. Within this, savings bank deposits grew 7.42 percent. SBI is the only bank which has linked its savings deposit interest repo to an external benchmark.The bank’s cost-to-income ratio improved to 53.47 per cent from 55.96 per cent over last year. Capital adequacy ratio improved to 13.59 per cent as of September.



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