India's largest lender State Bank of India is expected to report a net loss for the second consecutive quarter as provisions rise due to the Reserve Bank of India's revised stressed assets framework.
The lender has one of the highest outstanding restructured portfolios and will have to absorb a high credit cost, leading to a net loss of Rs 1,728 crore in the quarter ended March, according to Bloomberg consensus estimates. Net loss is seen anywhere between Rs 485 crore to Rs 4,170 crore, according to estimates of analysts tracked by Bloomberg.
In the December quarter, the bank had reported a quarterly loss of Rs 2,416 crore for the first time in 17 years. A Rs 23,239 crore divergence in bad loans from RBI's assessment had weighed on the bottom line.
Net interest income, or core income for the bank, is expected to remain subdued for the March quarter due to higher interest reversals.
What To Expect
- Loan growth is expected to be softer at 5 percent quarter-on-quarter led by the retail portfolio.
- Slippages are expected to remain high. Analyst estimates range from Rs 19,000-25,000 crore as compared with Rs 25,800 crore in the previous quarter as new RBI guidelines on stressed assets take effect. SBI Chariman Rajnish Kumar had told BloombergQuint in March that slippages would be lower than the December ended quarter and gross slippages for the financial year 2018-19 would not exceed 2 percent.
- Gross non-performing assets is seen at 10.6-11.5 percent as compared with 10.35 percent in the previous quarter.
- Given a strong seasonal quarter, recoveries are expected to cushion headline asset quality numbers to some extent.
- RBI has allowed banks to spread the provisioning for depreciation in the bond portfolio over four quarters. That may provide some cushion as Q3FY18 saw large mark-to-market bond provisions (which could be reversed if bank chooses to use that).
The watchlist of stressed accounts has reduced from Rs 21,288 crore as of September 2017 to Rs 10,341 crore as on December 2017. However, the bank will not disclose the watchlist separately the March quarter onwards.
Factors To Watch
- Slippages from the power book.
- Utilisation of RBI's relaxations for provisions on NCLT exposures, gratuity and MTM losses.
- Comments on asset quality trends for FY19.
- Commentary on insolvency resolution of large stressed accounts, especially after 75 percent recovery rate on its exposure to Bhushan Steel.
Most state-owned banks that have reported net losses for the March quarter, with the exception of Indian Bank and Vijaya Bank.
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