SBI scores over PNB and BoB on asset quality front

The much-awaited September quarter results of the top three public sector banks — State Bank of India, Punjab National Bank and Bank of Baroda — packed a fair punch, with all the three stocks rising 2 to 4 per cent on Friday.

Among the biggies, SBI scored better on the asset quality front, with its gross non-performing assets (GNPAs) as a percentage of loans falling marginally over the previous quarter on account of lower slippages. BoB, on the other hand, saw a sharp rise in slippages; PNB’s performance was a mixed bag.

While PNB’s GNPA fell marginally to 6.36 per cent in the September quarter, from 6.47 per cent in the previous quarter, it is still higher than its peers.

Moreover, PNB’s restructured loans, which can slip into the NPA category are also a cause for concern. Restructured loans as of September 2015 stood at about 10 per cent of loans.

For BoB, there was no substantial reduction in bad loans, either on account of recovery, upgradation or write-offs that could offset the sharp rise in slippages.

The bank’s slippages has been the highest in many quarters at ₹6,816 crore, up from ₹1,685 crore in the previous quarter.

The GNPA has thus moved up to 5.56 per cent of loans in the September quarter from 4.1 per cent in the last quarter. BoB’s restructured assets (globally) stood at 5.69 per cent as of September 2015.

SBI managed to trump its peers after a dismal performance last quarter. The bank’s fresh slippages came down to ₹5,875 crore, from ₹7,318 crore in the previous quarter.

SBI remains one of the better performing public sector banks on the asset quality front. Its GNPA stood at 4.15 per cent in the September quarter. From 5.7 per cent GNPA levels and slippages of about ₹11,000 crore (during the December 2013 quarter), the bank has been able to contain additional slippages in the past few quarters. Going by the results declared by large PSU banks in the past few quarters, it is evident that the asset quality trend has been anything but predictable.

Sudden and sharp rise in slippages or additions to restructured assets in a particular quarter have become commonplace on account of these banks’ lumpy exposures to stressed sectors.

Core performance weak The one trend that remains common across the three PSU banks is the subdued loan growth and tepid rise in core net interest income, give or take a few percentage points.

SBI, for instance, saw a loan growth of 10 per cent (year-on-year), marginally above the overall bank credit growth of about 8 per cent in the September quarter. But the pace of growth is markedly lower than of its private sector peers Axis Bank and HDFC Bank (23-28 per cent). PNB’s loans grew a slower 6.7 per cent in the September quarter, while BoB’s grew 7.5 per cent. The weak credit offtake has led to muted growth in these banks’ net interest income (4-7 per cent) in the past few quarters.

This is in stark contrast to the healthy 15-20 per cent growth in net interest income that peers, such as Axis Bank and HDFC Bank, managed to deliver even in the latest September quarter.

While a few private banks, such as Axis Bank and ICICI Bank, are also witnessing pressure on their asset quality, the levels of stressed assets are far lower compared to the PSU banks.

Private banks continue to score over their public sector counterparts, thanks to the healthy traction in loans and market share gains in low-cost deposits that have sustained their margins in recent quarters.

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