Country’s largest lender, State Bank of India today shook the investors by reporting a major loss of Rs 2,416 crore in the October-December 2017 quarter, its first Q3 loss in last 17 years.
The bank attributed the poor performance to losses in treasury operations at about Rs 2,000 crore due to hardening of bond yields, high provisions of Rs 17,760 crore towards substantial corporate loans slipping into bad loans and a significant hit in investment depreciation of Rs 4,044 crore.
“The net loss has to be viewed with hardening of bond yields, treasury losses, provisions for payments of employees of Rs 700 crore for two months…,” said Chairman Rajnish Kumar in a post-results press conference.
He added that SBI will raise Rs 20,000 crore in the next financial year without government subscription to it and focus on rebalancing the portfolio towards retail and SME (small and medium sector enterprise) growth after a muted corporate book.
A substantial part of loans that slipped into NPAs stood at Rs 25,836 crore, up from Rs 9,026 crore in Q2, of which 90 percent was under the stressed category. The watchlist of such loans or the potential bad loans declined from Rs 21,288 crore as on September 2017 to Rs 10,341 crore at the end of December.
About Rs 11,085 crore worth of corporate loans slipped outside of the watchlist.
Kumar says the slippages were because of divergences and there will be no need of a watchlist going forward.
Although the total provisions fell 1.9 percent during the quarter, SBI had to report heavy divergences at Rs 23,239 crore in its classification of NPAs compared with the Reserve Bank of India’s assessment as of March 2017. Of these, Rs 4,338 crore were upgraded.
These assets were duly classified as NPAs and a provisioning of Rs 5,720.6 crore was made for the same, SBI said in an exchange filing.
A large chunk of the accounts were related to the power sector at Rs 10,000 crore, Rs 4400 crore against iron and steel and Rs 2,600 crore towards telecom sector.
However, Kumar said that new stress is not building up in the bank. “Stressed assets as a percentage of total loans is coming down. A large chunk is now being recognised as NPAs. The remaining stress will be taken care in the March quarter. If you ask whether it has peaked? Yes,” Kumar said added that the accounts under insolvency proceedings will get resolved within the first quarter of FY19 (before June).
Kumar said for next year as per its assessment, SBI will be able to bring in slippages at 2 percent or below. For the nine months ending December, the slippage ratio stood at 4.17 percent and credit costs at 3.18 percent.
SBI has a total exposure of about Rs 78,000 crore to the two lists (12 and 30 accounts) identified by the RBI, and it has made 60 percent “sufficient provisions” towards the same.
“Resolutions will start to happen from Q1 in next financial year. How the resolutions play out will determine the time (when things start to improve).
On being asked if SBI’s performance narrates the functioning of the economy, Kumar said, “You can’t just economy’s performance for 90 days….Need a longer horizon to judge the state of the economy and a large organization like SBI.”
However, he said banking is beyond NPAs and though he is neither very optimistic nor pessimistic about the fourth quarter, SBI looks forward to a better FY19.moneycontrol