The State Bank of India (SBI) on Friday delivered a pleasant surprise when its standalone net profit jumped almost 219 per cent because of gains from a stake sale in a subsidiary, while its asset quality improved.
The country’s largest lender posted a net profit of Rs 3,012 crore, which was above Street estimates, compared with Rs 945 crore in the same period last year. During the period, SBI booked a Rs 3,500-crore profit from a stake sale in SBI Life.
Gross bad loans as a percentage of total loans eased to 7.19 per cent in the second quarter ended September 30, 2019, compared with 7.53 per cent in the preceding three months and 9.95 per cent a year earlier.
In absolute terms, the gross bad loans came in at Rs 1,61,636 crore against Rs 1,68,494 crore on a sequential basis. More importantly, fresh slippages dropped to Rs 8,805 crore against Rs 16,212 crore in the same period.
The Mumbai-based lender’s performance is a bright spot in the domestic banking industry where weak credit growth because of a sluggish economy has compounded the bad loan problem.
Segment-wise, the proportion of retail, corporate and SME loans declined even as it rose in the agriculture sector.
At a conference call on Friday, SBI chairman Rajnish Kumar said very few corporates were drawing down on sanctioned working capital limits, thus capping the loan growth to under-9 per cent. This, he said, has forced the bank to focus more on retail advances, which now constitute 60 per cent of the book.
He said loan waivers had caused slippages to swell to Rs 16,000 crore earlier and the Rs 8,000-crore is the normal number. “We have reached a situation where our gross slippages, even in not-so-good circumstances, are not likely to exceed two per cent,” the SBI chairman added.
Kumar further said the 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 the third quarter. The bank has already set aside 20 per cent of its exposure as provision.