State Bank of India, the country's largest lender, has reported 30 per cent year-on-year jump in quarterly profits for the fiscal second quarter ending September 2012. This is the smallest profit increase for SBI this year
Shares in SBI fell sharply on higher than estimated slippages and deterioration in asset quality, which has been the biggest hangover for public sector lenders.
The state-owned bank, which has exposure to debt-laden firms such as Kingfisher Airlines, Air India and Deccan Chronicle Holdings, said bad loans rose to 5.15 per cent of its loan book as of the end of September from 4.19 per cent a year earlier. Bad loans increased by nearly 45 percent to Rs 49,200 crore in the September quarter compared with a year earlier, SBI said.
Punit Srivastava of Daiwa Securities, which has a "hold" rating on SBI shares, said fresh slippages and restructured loans are on the higher side.
SBI shares, which have gained in the last few sessions, traded 3.5 per cent lower at Rs 2,166 on the BSE. The stock was the top loser on the 50-share Nifty benchmark.
"Fresh Restructuring of Rs 4,694 crore was a big negative surprise. Lower provisioning is making PAT look good, but overall numbers are not good," Nomura said in a note.
SBI has been aggressive in identifying bad loans and making adequate provisions since Chairman Pratip Chaudhuri took reins of the bank in 2011. Still, problem loans at the bank are the highest in the industry. That, coupled with low capitalisation, prompted ratings agency Moody's to downgrade the bank last year.
SBI reported Rs 3,660 crore in profits for the second quarter against Rs 2,810 crore in the corresponding quarter a year ago. The bottom line was aided by lower provisioning for bad loans. A brokers' poll carried by NDTV estimated net profit at Rs 3,551 crore.
Provisions for bad loans came down sharply to Rs 1,828 crore against Rs 3,385 crore in the last quarter. SBI's provisioning coverage ratio stood at 62.78 per cent at the end of the September quarter.
Net interest income, which is the core income for lenders, rose 5.3 per cent to Rs 10,973 crore against Rs 10,422 crore last year, but lower than estimated Rs 11,470 crore.
Large state-owned banks such as Punjab National Bank and Canara Bank earlier posted drops in net profit and a spike in bad loans in the fiscal second quarter, hurt by the economic slowdown.
(With inputs from Reuters)
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.
