After posting three consecutive quarters of losses, State Bank of India has turned the corner in the second quarter of FY2019, logging a standalone net profit of ₹945 crore, on the back of higher credit growth and lower slippages.

While the net profit in the quarter was up vis-a-vis net loss of ₹4,876 crore in the preceding quarter, it was down 40 per cent compared with the year ago quarter.

“The bank has returned to profit after three quarters of losses…Though it (net profit) is modest but I can assure you there is no looking back. This number is going to be bigger and bigger hereafter.

“...There is an all round improvement on the NPA (non-performing asset) front. We have now complete control on this demon of NPA. Gross NPA is now below 10 per cent at 9.95 per cent,” Rajnish Kumar, Chairman, told the media in the earnings call.

Net interest income (difference between interest earned and interest expended) was up 12.48 per cent year-on-year (y-o-y) at ₹20,906 crore (₹18,586 crore).

However, non-interest income was down 41 per cent y-o-y to ₹9,375 crore (₹16,017 crore) due to a sharp 84.50 per cent y-o-y decline in profit on sale of investments to ₹1,328 crore and 27 per cent y-o-y drop in forex income to ₹493 crore.

MTM & gratuity provisions

Kumar emphasised that his bank’s results should be analysed taking into account the fact that “even this time we had to provide MTM (mark-to-market provision) of ₹1,749 crore and the gratuity provision of ₹900 crore, which we are making every quarter (this was the third quarter — two quarters this year and one quarter last year).”

He added that the bank has to make gratuity provision for one more quarter and then this provision will be complete.

NPAs decline

NPAs declined ₹6,976 crore (reduction in NPAs was higher than slippages) during the quarter against ₹10,587 crore decline in the preceding quarter and an increase of ₹24,286 crore in the fourth quarter of FY18.

As at September-end 2018, GNPAs declined to 9.95 per cent of gross advances against 10.69 per cent in the preceding quarter. Gross NPAs declined by ₹6,976 crore during the quarter to ₹2,05,864 crore as on September-end 2018.

Loan loss provisions declined 39 per cent y-o-y to ₹10,185 crore (₹16,715 crore). Investment depreciation provisions shot up to ₹1,749 crore (₹37 crore).

Domestic advances were up 11.11 per cent y-o-y to ₹17,78,321 crore on the back of growth in corporate (up 14.30 per cent) and retail (8.91 per cent) advances. Foreign advances declined a shade (down 0.34 per cent) at ₹2,90,913 crore.

The bank, in a statement, attributed its net profit to the strategy on controlling credit cost (down to 2.27 per cent from 3.62 per cent), containing overhead expenses (to ₹6,680 crore from ₹6,900 crore) and focus on credit quality.

Higher credit growth and lower slippages lead to improvement in net interest margin to 2.73 per cent from 2.43 per cent in the year-ago period.

Deposits of the whole bank grew 7.02 per cent y-o-y to ₹28,07,420 crore as on September 18.

On NBFC exposure

On exposure to the debt-laden IL&FS, Kumar said his Bank had an exposure of ₹4,000 crore to 13-14 special purpose vehicles of the group. The exposure to the holding company (IL&FS) was ₹250 crore. This exposure is not a cause for concern and the bank had made a provision of ₹56 crore to one of the accounts, he added.

As at September-end 2018, the bank’s exposure to the non-banking finance company sector was ₹1,50,010 crore (₹1,60,653 crore as at June-end 2018) and it is committed to supporting the sector. By March-end 2019, it plans to buy loan portfolio from NBFCs amounting to ₹45,000 crore.

SBI shares closed at ₹295.30 apiece, up 3.45 per cent over the previous close on BSE.

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