SBI's Rs 31,000-crore loan watch list conservative compared debt book size

State Bank of India's loan watch list of Rs 31,000 crore is conservative compared to the size of its loan book of Rs 15,09,600 crore.

While its infrastructure exposure is at Rs 2,07,522 crore of which power sector exposure is Rs 1,36,455 crore, the bank has only taken only 5%, or Rs 6,822.5 crore, of the power sector into the watch list.

Arundhati Bhattacharya, chairman, SBI, told dna, "Our power exposure has very little discom or gas-based power plants. Most of the lending is to AAA-rated PSUs, also this is the case for the next 12 months. Most of the large steel companies we have already classified as NPA."

Considering that Rs 12,575 crore of the fresh slippages in the fourth quarter are from the large corporate accounts where it has exposure to all the top steel, construction and power companies that are stressed, a watch list of Rs 31,000 crore is conservative, say analysts, who hope to see many stressed accounts turning around during the financial year.

In the same time last year the gross outstanding non-performing assets (NPAs) from its large corporate loans were just Rs 1,510 crore, which climbed sharply to Rs 20,696 crore at the end of FY16. SBI says many of the large accounts are taken care of. But about 90% of its 5/25 refinance scheme is also out of the watch list.

The pain is expected to continue for a few quarters before the cleaning-up exercise is complete. The gross NPAs are now 6.50% of its gross advances, up from 4.25% of its advances in the last financial year.

In the iron and steel sector, the bank has proactively addressed the issues of banks loans. Of the Rs 82,533 crore iron and steel exposure, about 32.71% has been classified as NPA, restructured loans for 3.18% while 1.24% is estimated to be remaining stress. Iron and steel is one among the most stressed sectors for banks.

B Sriram, managing director in charge of Corporate Accounts Group (CAG), SBI, told dna, "The slippages from the asset quality review are only Rs 9,000, the remaining Rs 21,000 crore is what we have proactively classified as NPAs. Most of our power sector exposures are to triple A rated public sector undertakings and to new power units which are two to three years old where the operations are going to commence and where the accounts cannot be in the watch list."

Religare Securities in a report said, "SBI expects to contain slippages below 2.7% at Rs 40,000 crore (FY16 Rs 64,200 crore; down 37% YoY). As per the watch list, only 5% of power sector funded loans are considered stressed by the management, which is too aggressive in our view. Besides, 90% of 5:25 restructured assets are outside the watch list."

Gross NPAs from the international book also rose during the quarter from Rs 2,693 crore in the third quarter ended December 31, 2015, to Rs 7,785 crore in the fourth quarter . "All the increases pertain to our overseas borrowings of Indian assets classified by us, otherwise local books are not impacted," Bhattacharya told dna.

The slippage from the restructured to the NPA category has doubled from 10% the same time last year to 22% at end of the March 2016. The total restructured assets include Rs 39,055 crore.

Asset quality deteriorated further with higher-than-expected slippages of Rs 30,313 crore in the fourth quarter ended March 2016 as against Rs 20,692 crore in the preceeding quarter and higher than the management guidance of Rs 20,000 crore to Rs 25,000 crore during the quarter. The gross outstanding NPAs are Rs 96,173 crore. The gross NPAs of the agricultural loans and retail loans have come down during fiscal 2016 over the preceeding year.