SBI's results signal Indian banks' record bad loans peaking

Rajnish Kumar State Bank of India Chairman

Rajnish Kumar State Bank of India Chairman

The SBI reported a second-quarter (Q2) profit compared with a loss year ago, and a sequential improvement in its bad-loan ratio, sending its shares higher. The country's biggest lender had registered a profit after tax of Rs 2,006 crore in the corresponding period of the last fiscal.

The lenders Net Interest Income (NII) - the core income a bank earns by giving loans - increased 27.3 percent to Rs 18,585.90 crore versus Rs 14,600.16 crore previous year. "During the quarter, fresh slippage to NPA category was around Rs 2,000 crore", the lender's Managing Director and CEO Usha Ananthasubramanian told reporters here.

Total income of Dena Bank also fell to Rs 2,608.83 crore for the quarter, as against Rs 2,914.13 crore in July- September 2016-17. SBI Chairman Rajnish Kumar, who was named to his position just last month, has said tackling of bad loans would be a key priority, although the bank will not shy away from growth opportunities.

During the quarter, gross NPAs rose to 14.10 per cent of gross advances, up from 12.28 per cent a year earlier.

"Yes, this quarter we had some cushion available from the stake sale of SBI Life", he said.

Gross NPAs' ratio fell to 9.83 per cent from 9.97 per cent in the last quarter, while the net bad loan ratio decreased relative to the previous quarter to 5.43 per cent from 5.97 per cent.

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However, the provision coverage ratio improved to 65.1%, an increase of 431 bps from June 2017.

"Deposit rate unless you cut you can not cut lending rate ... for time being we are in for much more stable interest rate", he said. SBI's slippage ratio narrowed to 1.85% in the quarter from 5.38% in the prior three months.

Likewise, net NPAs rose to 10.61 per cent of net advances from 8.93 per cent year ago comparable period.

Net interest income grew by 27.3 percent year-on-year to Rs 18,585.9 crore in Q2 despite tepid loan growth.

The drop came after the bank's bad loans had climbed since SBI merged its five subsidiary banks with itself earlier in the year.

"We have made more than 50 percent provision for both of RBI's NCLT list".

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