Riding on double-digit growth in loans and net interest income, State Bank of India (SBI) net profit on a standalone basis in April-June quarter more than doubled to Rs 3,752 crore even as non-performing assets (NPAs) continued to rise, raising question marks over the lender’s deteriorating asset quality.
In the year ago period, India’s biggest bank by market capitalisation had clocked a net profit of Rs 1,583 crore. Though SBI Chairman Pratip Chaudhuri asserted that earnings have stabilised and said this is the “new normal” for the country’s largest bank, the rise in non-performing assets sparked concerns in the stock market.
“While we used to have a profit ranging from Rs 2,000- 2,500 crore per quarter, it has increased to more than `3,500 crore in this quarter. As our earnings have stabilised, this profit level has become the new normal for us,” Chaudhuri told reporters announcing the quarterly results at the bank headquarters.
Despite a second consecutive quarterly profit, SBI shares lost 4.26 per cent to close at Rs1,887.95 on the Bombay Stock Exchange on Friday as investors were concerned over mounting NPAs. SBI ended as the biggest loser among Sensex stocks, which closed flat at 17,557.74. In the process, the company’s market capitalisation declined by Rs 5,637 crore to Rs 1,26,689 crore.
During the quarter under review, SBI’s total income increased around 17% on year to Rs 32,415 crore from `27, 732 crore year ago. Net interest income increased to Rs 11,119 crore, a growth of 14.7% from `9,699 crore in corresponding quarter of previous fiscal. Net interest income is the difference between interest payments the bank receives on loans outstanding and interest it gives to customers on their deposits.
While deposits posted a growth of 16.1% during the quarter to Rs 11,02,926 crore, gross advances increased by 20% to Rs 9,45,819 crore.
As on quarter ended June 30, the bank’s net NPAs on standalone basis stood at 2.22% of total loan book, against 1.61% a year ago. In value terms, net NPAs soared to Rs 20,324 crore during the June quarter from Rs 12,435 crore in the corresponding period a year ago.
Similarly, the gross NPAs of the bank surged to 4.99% of the total loan book (Rs 47,156 crore in value terms) at the end of the first quarter as against 3.52% (Rs 27,768 crore) in the year ago period.
The sharp jump in NPAs is attributed to inability of corporates and other borrowers to repay loans timely due to slowdown in economy and many sectors under stress.
Analysts, however, expressed concerns over the rise in bad loans of SBI. “The rise in NPAs has been far higher than our and street estimates, which is cause for concern. The stock is expected to remain under pressure in the near term,” ICICI Securities said.
“Stress on assets can be seen from increase in Gross NPAs increasing to 4.99% and net NPAs to 2.22%. The slippage is clearly more than management guidance of `55 billion, which is disappointing. Going forward, direction on slippages and restructured assets need to be looked into,” said Rikesh Parikh, Vice President, -Markets Strategy and Equities, Motilal Oswal Securities.