India’s largest lender State Bank of India has seen rising stress levels in its home loan and MSME book with nearly 75% of the incremental slippages coming from these two segments in the June quarter. Fresh slippages came in at Rs 15,666 crore, while Rs 5268 crore from the retail book another Rs 6416 crore from the SME segment. The lender has already pulled back Rs 4700 crore from its fresh slippages in July. The stress list for the loans due between 30-90 days or SMA 1 and 2 accounts stood at Rs 11,303 crore.
The lender’s management was hopeful that with turnaround in economic activity, it would be able to rein in fresh formation of bad loans.
“It has been a tough quarter, the slippages that we have seen have come in unusual circumstances which is on the account of the lockdowns, once the economic activity comes back we will be in a position to pull back these slippages, which has been validated by our performance in July,” Dinesh Khara, chairman, State Bank of India said.
The lender also received Rs 7300 crore restructuring requests, of which it approved recast worth Rs 5246 crore. Khara once again guided that the lender would be able to control slippages within 2% of the total loan book.
“We have slippages coming from MSMEs and home loan space which is about 1.39% of the book, but we have seen a decent pull back on both home loans and personal loans,” Khara said. “MSME sector is more sticky, many of the SME borrowers also would be the ones to avail home loans. I think essential stress seen in this book is on account of disruption in cash flows for the SMEs.”
The lender also recovered Rs 1692 crore from
through sale of shares.
The lender also reported a 55.3% rise in its June quarter net profit at Rs 6,504 crore on the back of dip in provisions, growth in non-lending business and one time recovery from Kingfisher Airlines. The profit beat consensus estimate of analysts tracked by Bloomberg which pegged profits at Rs 5,398 crore. The lender had posted profit of Rs 4189 crore a year ago.
The bank’s net interest income, the difference between interest earned and expended, witnessed a growth of 3.7% (YoY) at Rs 27,638 crore.
The lender saw improvement in its asset quality metrics with gross non-performing loan ratio coming in at 5.32% at the end of the June quarter versus 5.44% same period a year ago. The net NPA loan ratio was at 1.77% for the quarter under review against 1.86% a year ago.
“SBI reported a steady operational performance, with incremental stress not too high when compared to other private sector peers,” said Siddharth Purohit, senior analyst, SMC Institutional Equities. “While the loan growth is still subdued, I believe lower provisions going ahead will be the trigger for re-rating.”
On the credit growth front, SBI recorded overall advances growth of 5.8% year-on-year to Rs 25.24 lakh crore. Retail advances growth continued to remain strong at 16.4% YoY, while SME advances remained muted at 2% YoY and corporate book de-grew 2.3%. In retail, home loans grew by 11% YoY to Rs 5.05 lakh crore.