SBI’s bad run continues

Overall, SBI added `4,255 crore to bad loans during the December quarter compared to `2,016 crore in the preceding three months. Photo: Hemant Mishra/Mint

Live Mint : Ravi Krishnan :Thu, Feb 14 2013. 03 07 PM IST

Despite advances growing at 15.5% from a year ago, the bank saw a decrease in net interest income

Mumbai: State Bank of India’s (SBI’s) bad run continued in the December quarter as both operating metrics and asset-quality parameters disappointed.

Despite advances growing at 15.5% from a year ago, the bank saw a decrease in net interest income. That was probably owing to a slip in net interest margins. In a statement, the bank said that while the average cost of deposits increased 41 basis points (bps) from a year ago, the yield on advances declined by 18 bps. The result was that net interest income declined by 3%, the first time in at least 12 quarters that this has come to pass. A basis point is 0.01 percentage point.

In the event, the bank was bailed out by a 76% increase in “other income”. Further details are awaited as to what component of this push came from fee income. It is likely that the boost to the component came from trading gains/sales of investments.

Thus, SBI’s operating profit grew a tepid 7.3% from a year ago. The bank also had to set aside more money as provision against bad loans which crimped net profit growth to 4.1%. But even these were not enough as the provision coverage ratio slipped further to 61.49% from 62.78% at the end of September.

Overall, the bank added Rs.4,255 crore to bad loans during the December quarter compared to Rs.2,016 crore in the preceding three months.

 As a result, gross non-performing assets as a ratio of total loans jumped to 5.3% at the end of December compared to 5.15% three months earlier. Reports from TV channels indicate that SBI had gross slippages of Rs.8,000-odd crore and recast loans worth anotherRs.2,300 crore.

The results are not too much of a surprise given the poor macroeconomic scenario. But with a turnaround not in near sight, asset quality pains will likely continue.