State Bank of India's net profit increased by 12 per cent to Rs 2,810 crore in the quarter ended September 30, 2011, from Rs 2,501 crore in the corresponding quarter last year. However, for the six-month period ended September 30, net profit was down 19 per cent to Rs 4,394 crore (Rs 5,416 crore).
“We see pressure on asset quality, but we have provided for this adequately,” said Mr Pratip Chaudhuri, Chairman, SBI.
Bad loans
Gross slippages, including those from restructured accounts, in the quarter were to the tune of Rs 8,000 crore, taking the gross non-performing assets to Rs 33,946 crore (Rs 23,205 crore as on September-end 2010) and the gross NPA ratio to 4.19 per cent (3.35 per cent). Slippages from restructured accounts in the reporting quarter were Rs 1,762 crore.
Slippages were from the corporate, small and medium enterprises and agriculture segments, said Mr Chaudhuri.
The sectors that saw the highest slippages were iron and steel, mining, government-sponsored schemes, textiles, engineering, and gems and jewellery.
Provisions were higher due to higher slippages. The loan loss provisions in the second quarter were Rs 2,921 crore (Rs 2,162 crore).
Exposure to power sector
SBI's total exposure to the power sector is Rs 31,000 crore. Of this, Rs 9,000 crore is to State electricity boards.
In the second quarter, neither has the bank received any request for restructuring any of its power sector loans, nor has any account become an NPA, Mr Chaudhuri said.
However, in the first quarter one power company loan had become an NPA. In the second quarter, one large agro-based company had turned an NPA and the exposure to this company was Rs 760 crore.
Going ahead, gross NPAs could move up due to stress in the economy, said Mr Chaudhuri. “Domestic demand is slack and even overseas there is turmoil. So, people are not willing to execute orders against Letters of Credit,” he said.
But the bank is making adequate provisions against NPAs, he emphasised.
Focus on recovery
The bank is also focusing on recovery from NPAs. “NPA recovery is picking up. As farmers get money we will accelerate our recovery effort,” he said.
In the September quarter, cash recovery was Rs 736 crore and up-gradations were to the tune of Rs 1,036 crore.
Non interest income was lower as last year the bank had received interim dividend from its subsidiaries and also earned fee income from the Tata-Corus transaction, which was not there this year.
This year, the bank is targeting advances growth of 16-18 per cent and net interest margin of 3.5 per cent.
The bank also reduced the share of bulk deposits from 17 per cent to 12 per cent of total deposits, in order to protect NIM.
“We are curtailing both bulk deposits which we raise from public sector undertakings and Certificates of Deposits. We are seeing the benefits on NIM,” Mr Chasudhuri said.
Shares of SBI fell 6.76 per cent on the BSE, to close at Rs 1,862.5, on Wednesday.