State Bank Q4 net falls but asset quality rises

May 24 2014, 05:04 IST
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SummaryQuarterly profit at R3,041 crore beats expectations; scrip rises 10%

State Bank of India (SBI) on Friday reported a net profit of R3,041 crore for the quarter ended March, down 7.8% from a year earlier on the back of strong top line growth, flat expenses and improving asset quality.

The results cheered the Street and sent the stock surging to a three-year high of R2,755.25 on the BSE, up 9.6% from its previous close. So far in 2014, the SBI counter has gained more than 56%.

Speaking at a press conference, SBI chairman Arundhati Bhattacharya attributed the fall in net profit, which came in better than analysts estimates, to higher provisioning.

Our operating profits were strong but we needed to make provisions for stressed loans and for taxes, Bhattacharya said. Operating profit at the countrys largest bank rose by 37% in the fourth quarter of FY14 to R10,628 crore while domestic net interest margin (NIM) stayed stable at 3.49%.

Asset quality improved with gross non-performing assets (NPAs) showing a sequential decline of 78 basis points to 4.95%; net NPAs for the January-March period fell 67 bps quarter-on-quarter to 2.57%. In absolute terms, gross NPAs were down 9.1% sequentially, to R61,605 crore, while net NPAs slipped 16.3% to R31,096 crore in the quarter. Bhattacharya observed that the banks efforts to clean up the loan book had resulted in higher recoveries and upgrades.

As we mentioned last time, we had set up special committees to look after the accounts that are showing stress but are not necessarily NPAs and these have worked well, she said.

Recoveries in the January-March quarter stood at R3,389 crore, more than twice the amount recovered in the December 2013 quarter. The bank upgraded R5,054 crore worth of loans to the standard category, a near-fourfold increase over the October-December period.

SBI reported a growth in net interest income (NII) for the quarter of 18.7% year on year to R12,903 crore while other income was up 18.7% at R6,586 crore. Bhattacharya said the pilot programme launched to improve asset quality of small and medium enterprises had been successful and would soon be rolled out.

BI provided R5,884 crore for loan losses in Q4FY14, up 48% year-on-year, even as fresh slippages dropped to R7,947 crore, down 30% quarter-on-quarter.

The lender, however, saw a big sequential jump in restructured loans to R7,636 crore from R3,900 crore in the October-December period. It also wrote off R5,698 crore, slightly more than in the December quarter.

As on March

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