MUMBAI: The country’s largest lender State Bank of India shocked the Street when it reported a massive quarterly loss on the back of spike in provisions due to bad loan divergences and hardening of bond yields which led to treasury losses.
The PSU lender posted a net loss of Rs 2,416 crore at the end of the December 2017 quarter versus a profit of Rs 2,610 crore during the same period last year. 16 analysts polled by Bloomberg had estimated December quarter net profit at Rs 2,059.4 crore.
The PSU lender posted a net loss of Rs 2,416 crore at the end of the December 2017 quarter versus a profit of Rs 2,610 crore during the same period last year. 16 analysts polled by Bloomberg had estimated December quarter net profit at Rs 2,059.4 crore.“Due to hardening of bond yields the bank had to provide Rs 3,400 crore as mark-to-market losses, treasury income was also impacted as there no major sale of investment, we also had to make higher loan loss and Rs 700 crore of wage related provisions,” said Rajnish Kumar, Chairman, SBI while speaking to the media after the quarterly results release.
“This has been a challenging year for the bank, but every cloud has a silver lining. In 2019 our estimate is that we will be able to contain fresh slippages and credit costs within 2 per cent.”
The bank also said that the RBI has pointed out certain divergences in the bank’s asset classification and provisioning as on 31 March, subsequent to the annual Risk Based Supervision (RBS) exercise conducted for fiscal 2017.
Under the audit the regulator detected asset classification divergence of Rs 23239 crore at the end of FY17. This led to the bank making a provision for Rs 5720.6 crore against these accounts. The bad loan divergence led to the bank reporting fresh slippages of Rs 25836 crores. SBI management said almost 90per cent of the fresh slippages came from the watch list which now stands at Rs 10341 crores.
“SBI has posted very weak set of results, slippages are much higher than expected and even the quantum of divergence is on a higher side,” said Siddharth Purohit, research analyst with SMC Institutional Equities. “But large part of the slippages has been from the watch list so the watch list should get narrowed down now.”
Provisions and contingencies figures increased to Rs 18,876.21 crore for the quarter under review against Rs 8,942.83 crore in the same period last year. Gross bad loans as a percentage of total loans stood at 10.35per cent at the end of the December quarter compared with 7.23per cent during the same period a year ago and 9.83per cent in the previous quarter.
“We are the end of the stressed asset cycle we have had enough of it in the last two years, but the next year looks very good to us,” Kumar said. “I don’t want to sound very optimistic on Q4FY18 but I am not pessimistic about it either. Today I am sitting in February in 45 days no miracle is going to happen but we can hope for a much better performance next fiscal.”
The bank also registered a tepid advances growth of 2.52 per cent. While corporate book continued to post losses the retail advances grew at a strong 13.59 per cent.