Mumbai: State Bank of India on Wednesday reported its worst quarterly profit in over two years with a sharp 35 per cent drop in earnings at Rs 2,375 crore in the three months to September, hit hard by higher provisions for staff expenses, bad loans and investment depreciation. Standalone total income was Rs 37,199.92 crore as against Rs 32,953.47 crore in the same period a year ago.
"Provisions for loan losses, provision for the staff wage hikes, provision for pensions and of course the investment depreciation were the reasons for dip in the net profit in the quarter," the newly-appointed SBI chairman and managing director Arundhati Bhattacharya said.
This is the worst quarterly performance of the nation's biggest lender since the massive 90 per cent plunge which brought the bank's net profit to just Rs 20.88 crore for the March 2011 quarter. Pratip Chaudhuri had taken over as chairman in April, 2011.
"Also, the fact that we have really not been able to book that kind of income on sale of investments as we had been able to do in the first quarter, due to the fact that interest rates have actually hardened. All of this accounted for lower bottomline," Bhattacharya said.
This is Bhattacharya's maiden earnings report after she took over charge on October 7 as the first woman head of SBI which controls nearly a quarter of country's banking assets. SBI's total provision rose 6.53 per cent to Rs 3,937 crore as against Rs 3,696 crore in the same period last year. Despite the poor set of numbers, the market lapped up the SBI counter, which is down around 50 per cent from its lifetime high.
Today, the SBI counter closed 1.34 per cent higher at Rs 1697.85 on the BSE, whose benchmark Sensex shed 0.45 per cent. Saday Sinha, banking analyst at Kotak Securities said the bank's net interest margin (NIM) at 3.2 per cent was ahead of his expectations on the back of a 19 per cent loan growth. However, the profit after tax (PAT) came a shade below expectations due to higher-than-expected operational expenditure and Non-Performing Assets (NPA) provisions, he added.
During the quarter, major slippages came from the power sector (Rs 1,700 crore), iron and steel (Rs 600 crore) and infrastructure (Rs 700 crore), said SBI chief financial officer and deputy MD RK Saraf. Although the bank's slippages of 3.1 per cent is lower than the previous quarter, asset quality pain persists for the stock with net addition to impaired assets remaining at elevated levels, Kotak's Sinha said.
Staff expenses jumped 36 per cent to Rs 5,819 crore from Rs 4,280 crore in the same period last year, while salary expenses jumped 26.74 per cent to Rs 4,536 crore. Provisions for pension rose 108.62 per cent to Rs 1,054 crore in the quarter as against Rs 505 crore a year ago. "The staff expenses have gone up quite sharply on account of the fact we have to make 15 per cent provisions for the wage negotiation.
We are also having to make additional provision on account of the fact that the LIC has changed the mortality table," Bhattacharya said. According to LIC's new mortality table, the life expectancy has increased to 81 years.
At the end of the reporting quarter, the bank's gross non-performing assets (NPAs) rose to 5.64 per cent of gross advances, compared with 5.15 per cent year a year ago. Net NPAs also rose to 2.91 per cent from 2.44 per cent. However, on a sequential basis, NPAs declined by 39.23 per cent. Net interest income in second quarter increased 11.64 per cent to Rs 12,251 crore from Rs 10,974 crore a year earlier.
Domestic net interest margin (NIM) increased sequentially to 3.51 per cent in the quarter from 3.44 per cent last year. Deposits grew 14.01 per cent to Rs 12,92,456 crore in quarter as against Rs 11,33,644 crore, while gross advances jumped 19.18 per cent to Rs 11,39,326 crore.
"Right now, our deposit growth on year-on-year basis is at 15 per cent and we expect to be able to grow at the same manner on the deposit side. On the credit side, we have to see how it happens, but currently we will maintain between 16 to 18 per cent," Bhattacharya said. The domestic credit deposit ratio increased from 76.64 per cent in September 12 to 80.54 per cent this quarter, a jump of 390 basis points.
