SBI net soars six-fold buoyed by asset quality, margins

Mumbai: A massive improvement in asset quality and gains from stake sale in a subsidiary have helped State Bank on Friday report a near six-fold growth in consolidated net at Rs 3,375 crore for the three months to September period.

On a standalone basis, net income of the nation's largest lender that controls over a fifth of the system-wide credit and deposits, soared 212 per cent to Rs 3,011 crore. However, amidst a slowing economy, very few corporate are drawing down on sanctioned working capital limits, capping the loan growth to under-9 per cent, forcing SBI to focus more on retail advances, which clipped at 19 per cent and now constitute 60 per cent of the book, chairman Rajnish Kumar said, adding once things turnaround, the share of corporate loan book will grow.

On asset quality, gross non-performing assets dipped to 7.19 per cent of the Rs 22.48-lakh crore loan book, from 9.95 per cent a year ago, which was also boosted by a halving of fresh slippages to Rs 8,000 crore.

Kumar said loan waivers have caused slippages to swell to Rs 16,000 crore earlier, and termed Rs 8,000-crore as the normal number, and also exuded confidence of keeping gross slippages under 2 per cent.

"We have reached a situation where our gross slippages, even in not-so-good circumstances, are not likely to exceed 2 per cent," he said. SBI booked a Rs 3,500-crore profit from a stake sale in SBI Life, which was fully used to provide for two potential cases of stress that the bank is staring at, Kumar said, adding they have also aside Rs 2,600 crore for a power account where restructuring has failed, while Rs 900 crore will be utilised for a potential loss towards an exposure to a mortgage lender currently in stress.

Overall provisions for bad assets inched up to Rs 11,040 crore from Rs 10,184 crore, helping the bottom line. Kumar said SBI has a Rs 7,000-crore exposure to DHFL, (which he did not name though) and expects the account to slip into NPA in Q3.

The bank has already set aside 20 per cent of its exposure as provision. About the difficulties banks are facing due to their exposure to DHFL, including banks and mutual funds to reach an agreement on resolution, Kumar said SBI can has the capability to deal with any eventuality.

On the warnings of banks' exposure to NBFCs resulting in system-wide difficulties ahead, Kumar said many a time, the threats are "overstated" and that SBI has not faced issues on this segment barring one account.

Kumar said the bank has already classified its Rs 1,200-crore exposure to a power project as an NPA, but will have commit another Rs 2,600 crore to the same account to honour a letter of credit, but the bank has already made full provision this upcoming drawdown.

Kumar said a part of the Rs 16,822 crore stressed accounts, which are standard now, will slip into NPAs in the next two quarters, but stressed that the slippages will be within the Rs 32,000-crore range.

From an upcoming stress perspective, accounts over due for 30-89 days have come down to Rs 9,312 crore from Rs 10,289 crore in the June quarter. The provision coverage ratio now stands at 81.23 per cent, which is a 10 percentage points improvement over the year, and Kumar said this along with a strong capital base of 13.59 percent places the bank in good shape for the future.

The bank has written off Rs 12,000 crore of loans during the reporting quarter, down from Rs 16,000 crore in Q1, and as against Rs 58,000 crore in FY19, Kumar said, explaining that these items have been moved away from the balance sheet and cannot be called write-offs.

The bank has an exposure of Rs 35,000 crore to the telecom segment as of September, and Kumar said it is difficult to assess the impact of the Supreme Court judgement on average gross revenue issue, involving a payout of over Rs 92,000 crore to the government.