The nation's largest lender State Bank on Friday reported a net loss of Rs 4,876 crore for the June quarter due to higher provisions on account of wage revisions, treasury losses along with enhanced gratuity ceilings, even as the bank reported improvement in overall asset quality.
The bank that controls over two-fifths of the system had reported a net profit of Rs 2,006 crore in the same quarter last year and the management, however, exuded confidence to return to profit in the December quarter.
The bank attributed the hefty loss to lower trading income and significant mark-to-market losses due to hardening of bond yields, and also not availing of the benefit of the RBI dispensation with regard to amortisation of MTM loss.
Staff expenses rose 25.68 per cent during the quarter mainly on account of provision for wage revisions and enhancement in gratuity ceiling, excluding which the increase is only 1.1 per cent.
Gross NPAs stood at 10.69 per cent as against 9.97 per cent, while net NPA declined to 5.29 per cent from 5.97 per cent. Still, the bank made loan loss provision of Rs 13,038 crore, up from Rs 12,125 crore last year.
"From the December quarter onwards we expect to turn black. All the factors that could impact the earnings going forward have been taken care of in the June quarter itself.
"In the September quarter we intend to further improve the provision coverage ratio on the asset side so that from there onwards there will not be any looking back and there will be no hangover of the past credit cost," chairman Rajnish Kumar told reporters in a post-earnings concall.
He also said the bank did not avail of the option given by the Reserve Bank to spread mark-to-market losses to the next quarters but has recognised the entire loss on investments which came in at Rs 5,893 crore.
"We have not used the RBI dispensation to stagger our treasury losses. We have been very aggressive as far as provisioning on loans is concerned. Our loan loss cover has gone up by 300 basis points," Kumar said.
Loan loss provision increased to Rs 13,038 crore from Rs 12,125 crore last year, he added.
Reacting to the numbers, SBI shares dived over 6 per cent during the trade and closed with a loss of 3.8 per cent at Rs 304.45 apiece on the BSE, whose benchmark Sensex shed 0.41 per cent after a massive rally to add 1,000 points in the past 10 days of trading.
Interest expenses on deposits were down by 2.09 per cent from Rs 34,990 crore to Rs 34,258 crore despite a growth in deposits of 5.58 per cent. But non-interest income slumped 16.57 per cent from Rs 8,006 crore to Rs 6,679 crore mainly on account of lower trading income. Excluding treasury income, non-interest income rose 27.39 per cent, boosting fee income from Rs 4,870 crore to Rs 4,976 crore, up 2.19 per cent.
The bank made Rs 902.50 crore provisioning for gratuity and Rs 900 crore for wage revision, which also impacted the bottomline. Total provision increased to Rs 16,849 crore from Rs 9,869 crore in the same period last year.
While deposits rose 5.58 per cent to Rs 27,47,813 crore, domestic advances grew 7.21 per cent to Rs 17,23,443 crore, while gross advances grew 5.49 per cent to Rs 19,90,172 crore of which retail loans rose 14.11 per cent to Rs 5,59,134 crore and home loans clipped at 13.01 per cent to Rs 3,20,205 crore.
The numbers were bad despite the bank booking better domestic net interest margin that improved to 2.95 per cent from 2.50 per cent. This helped it report a net interest income of Rs 21,798 crore, a growth of 23.81 per cent from Rs 17,606 crore last year.
Gross non-performing asset stood at 10.69 per cent as against 9.97 per cent, while net NPAs declined to 5.29 per cent from 5.97 per cent. But in absolute terms, gross NPAs declined from Rs 2,23,427 crore in March to Rs 2,12,840 crore in June, whereas net NPAs declined from Rs 1,10,855 crore to Rs 99,236 crore during the same period.
Recovery and upgrades stood at Rs 14,856 crore, while fresh slippages were at Rs 9,984 crore of which 91 per cent came from the watch list which stood at Rs 24,633 crore.
The bank has exposure to Jet Airways, which has been facing financial headwinds of late, and the account is part of the watch list, SMA 1 and SMA 2, the chairman said.
"We had earlier given a guidance that our fresh slippage ratio will not exceed 2 per cent and slippage ratio of 1.95 per cent in the June quarter is very much in line with that," Kumar said, adding there is not any major concerns on the SME portfolio.
Bad loans in the agriculture sector increased to 11.60 per cent due to the debt waiver scheme announced in Maharashtra and Karnataka.
"We are not worried about the agriculture and SME portfolios. My problem is on the corporate side. Our entire performance depends on how corporate entities are behaving," Kumar said.
The provision coverage ratio on NCLT list 1 and list 2 are at 65 per cent and 79 per cent, respectively, he said.
As part of rationalisation of its overseas operations, the bank has identified nine more foreign offices to be closed in the current financial year, he said.
The bank will look at monetising some of its assets which includes divesting a part of its holding in SBI General, SBI Card and SBI Mutual Fund.
He said the bank will also bring down its stake in UTI Asset Management Company to below 10 per cent as per the Sebi requirement.