State Bank of India (SBI) saw steady improvement across operating metrics during the quarter ended December 31 with domestic loan growth at about 15 per cent. However, higher operational expenditures led by pension and wage revisions have eaten up a part of the bank’s profits, leaving the onus on better net interest margins and credit growth to boost revenues.
With respect to asset quality, though slippages during the December quarter stood at Rs 65,400 crore as against Rs 1,09,00 crore in the previous quarter, the management hopes to close FY19 with slippages of less than Rs 40,000 crore and about Rs 25,000-30,000 crore in FY20.
According to the bank, ailing IL&FS’ exposure of about Rs 900 crore is currently classified as an NPA along with a provision of 50 per cent. Though the SPVs exposure is standard, SBI provided 15 per cent to be on the safe side. However, investors may sit tight with regards to DHFL, where SBI’s exposure is about Rs 11,000 crore, with the bank indicating there’s ample cash to cover for it and maintaining that there’s no asset liability mismatch. But this could cause trouble in case the account goes out of whack.
Meanwhile, in some good news, the bank indicated that the incremental stress within the bank and the industry in general, is waning with the recent quarter’s performance reflecting the improving situation of balance sheets and in particular, the asset quality of Indian banks.
As for resolution, though there have been delays, if SBI’s expectations to recover Rs 34,000 crore from eight accounts at NCLT is anything to go by, the going likely to get better. In all, it took 378 accounts to NCLT with an aggregate exposure of Rs 1.1 lakh crore, of which 80 accounts (worth Rs 36,000 crore) aren’t even admitted, while 54 accounts worth Rs 10,000 crore will likely go for liquidation.