Rising pressure on account of bad loans and muted growth in interest on loans weighed on State Bank of India’s profitability in the October-December quarter.

Net profit in the reporting quarter was marginally up by 4 per cent at Rs 3,396 crore against Rs 3,263 crore in the year-ago period.

Net interest income (difference between interest earned and interest expended) declined by 3 per cent to Rs 11,154 crore from Rs 11,519 crore in Q3 FY12. However, ‘other income’ rose by 76 per cent to Rs 3,648 crore (from Rs 2,073 crore in Q3 FY12).

During the quarter, total provisions increased by 10 per cent to Rs 4,395 crore from Rs 3,997 crore in the year-ago quarter. Provisions towards loan losses (forming part of the total provisions) were lower at Rs 2,766 crore (Rs 3,006 crore).

On the loans front, the bank turned selective on loans to mid-corporates (loan growth 7 per cent) due to rising bad loans.

Loan growth was robust in the large corporate (26 per cent), agriculture (24 per cent) and international (28 per cent) segments.

Loan migration

Migration of loans in the large corporate and retail segments due to lower lending rates helped the bank grow its advances, said Pratip Chaudhuri, Chairman.

“Many accounts from the pharma and iron and steel sectors in the mid-corporate segment have slipped into the bad loan category. We expect about Rs 2,000 crore of those assets to be upgraded to the standard category by this fiscal year-end,” said Chaudhuri.

The reporting quarter saw net slippages of Rs 4,256 crore (Rs 2,046 crore in the previous quarter).

Capital adequacy ratio as per Basel II stood at 12.21 per cent from 11.60 per cent last fiscal.

“We expect loan growth to stay above 18 per cent, while deposit growth will be above 14 per cent for the fiscal,” Chaudhuri added.

Shares of SBI closed at Rs 2,214.35 per share, down 1.80 per cent over the previous close, on the BSE.


(This article was published on February 14, 2013)
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