Money & Banking

SBI: Slippages shrink, but restructured loans rise

Radhika Merwin BL Research Bureau | Updated on January 23, 2018 Published on May 22, 2015

SBI’s profit growth driven primarily by other income

The sharp fall in slippages and bad loans at the State Bank of India during the latest March quarter comes as a welcome relief after the dismal performances by several of its peers. The bank’s gross non-performing assets (GNPA), which fell by around 70 basis points sequentially to 4.25 per cent of loans, is the lowest since the September 2011 quarter. While the bank’s effort to contain additional slippages — down to ₹4,769 crore in the March quarter from ₹7,043 crore in the December quarter — is commendable, its asset quality performance has weakened.

SBI has been sporting the lowest proportion of restructured assets at a little over 3 per cent of loans compared to 7-10 per cent for other PSU banks. But during the March quarter, there has been a substantial increase in its restructured book.

The bank’s restructured assets are now close to 4.2 per cent of loans, up from about 3.6 per cent in the December quarter. The absence of “regulatory forbearance” on restructuring from April 1, 2015, could be one of the reasons for this.

Subdued loan growth

SBI posted a 23 per cent growth in net profit during the March 2015 quarter over the year-ago period. This growth was driven primarily by a 29 per cent rise in other income. Net interest income grew 14 per cent in the quarter, better than the 9 per cent growth in the December quarter.

The loan growth at 7.25 per cent, while marginally better than the 6.9 per cent growth in the December quarter, lagged the industry’s 10 per cent growth. The home loan growth has slowed in the last couple of quarters; the 13 per cent growth in 2014-15 is lower than the 18 per cent recorded in the preceding year. Growth in auto loans, on the other hand, improved to 15 per cent (12.6 per cent in 2013-14).

Despite slowing loan growth and increase in restructured assets, SBI scores better than peers such as Punjab National Bank and Bank of Baroda. While BoB’s GNPA is 3.7 per cent of loans, its domestic restructured book is 8 per cent of loans. For PNB, its stressed assets (GNPA plus restructured book) are about 16 per cent of loans.

Published on May 22, 2015
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