Bank reports 30.54% rise in net profit in Q2 on the back of rise in other income; says it would take a year more for lending to pick up
State Bank of India (SBI), India's largest bank by assets, on Friday indicated that bad loan problem is gradually on the decline but does not expect any dramatic turnaround.
During July-September, the bank reported fresh accretion of Rs 7,700 crore of bad loans, lower than the Rs 8,365 crore reported in the same quarter a year back.
Total bad loans at the lender as on September-end stood at Rs 60,712 crore.
The bank restructured Rs 4,351 crore of bad loans, recovered Rs 965 crore of bad loans and upgraded Rs 1,670 crore to standard accounts. It has a fresh pipeline of Rs 3,000 crore worth of loans for restructuring.
While the bank is happy about drop in bad loans, it does not see pick-up in loans any time soon. It is still a year away, said the bank.
On Friday, SBI reported a 30.54% rise in net profit to Rs 3,100 crore on the back of lower expenses, robust growth in the other income and lower bad loans. Total income increased 14.91% year on year to Rs 17,844.75 crore.
Arundhati Bhattcharya, chairman of SBI, said in a press conference, "The profits came from other income and net interest income, by pruning expenses, and also growth in advances."
Its other income grew 39.43% over the previous quarter while net interest income rose 8.35%. The growth in the international book also contributed to 20% of the net profit.
The bank cut its expense ratio 477 basis points as 11,000 officers retired. Though the bank hired 5,000 watch and ward officers, the net reduction of employees was still high at 4,700. The bank plans to hire 1,800 probationary officers and 3,000 clerical staff, but said there will not be any bunching in hiring.
During the quarter, the bank reported a forex income of Rs 466 crore, dividend income of Rs 41 crore and write-back from recoveries of Rs 466 crore.
During the quarter, SBI increased its provisions and contingencies 22.26% over the preceding quarter and 41.15% year on year to Rs 4,274.98 crore. However, lower tax outgo negated the impact of provisioning in its bottom line to some extent.
On Friday, the bank's share price rose 2.55%, or Rs 69.30, on the BSE to end at Rs 2788.45.
"When we will see asset quality is improving, I don't believe that we will really see anything very sharp because this downturn has been very deep," Bhattacharya said. "Once we see the demand cycle coming back, definitely we can begin to see things happening at a faster pace," she said, adding that was still about a year away.
Nitin Kumar, analyst with Prabhudas Lilladher, said, "The other income and a control on the expenses contributed to the profits. Fresh slippages have also come down. The bank is also cutting down the loan growth in its mid-corporate and SME portfolios."
The bank's loan book and total deposits expanded by 9.66% and 14.03% year on year to Rs 12,09,647.65 and Rs 14,73,784.65 crore, respectively. Net interest margin (NIM) decreased five basis points quarter on quarter, but rose 1 bps year on year to 3.49%.
The bank is capitalised to support its growth trajectory with 12.33% of its Basel III-capital adequacy ratio (CAR), which is 333 bps higher than the regulator's stipulated norms. Provision coverage ratio (PCR) stood at 63.18%.
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