SBI Q1 Profit Falls 20%, Bad Loans Situation Worsens

The Lok Sabha on Thursday passed a bill that will approve merger of some associate banks with the State Bank of India with the government saying that it will lead to increased capital base of the largest public sector lender. Representational Image

The Lok Sabha on Thursday passed a bill that will approve merger of some associate banks with the State Bank of India with the government saying that it will lead to increased capital base of the largest public sector lender. Representational Image

Post the merger with its five associates and Bharatiya Mahila Bank, State Bank of India reported a five-fold jump of 436 percent in net profit at Rs 2,006 crore as a merged entity for the first quarter of FY18 helped by fall in provisions. The minister added that in the last two years, 29 crore bank accounts were opened, of which 25 per cent were zero balance accounts, and that farm loans increased from Rs 3.5 lakh crore in 2009-10 to Rs 10.65 lakh crore in 2016-17.

SBI, which accounts for about a fifth of India's banking sector assets, said for the merged entity, gross bad loans as a percentage of total loans was 9.97 percent at the end of June from 9.11 percent three months earlier and 7.40 percent at the end of June previous year. The bank's loan portfolio shrank Rs65,000 crore to Rs18,50,000 crore.

Indian banks' sour assets have surged in the past year or so after a regulatory crackdown to clean up the sector dominated by state-run lenders. Hence, the slippages numbers were compounded.

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She said rationalisation of branches would result in an annual saving of Rs 1,160 crore for the bank over a period of time.

Profit on the consolidated banks' accounts rose 435 per cent to Rs2,006 crore, from Rs374 crore net a year earlier, chairman Arundhati Bhattacharya told reporters. Of this, Rs. 8,363 crore are from the corporate book.

Net interest income fell 3.5% to 176.06 billion rupees. Lower retail slippages and higher recoveries would lead to a reduction in retail NPAs, the bank said in a statement.

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Non-interest income also decreased by 8.6 percent from Rs 8,761 crore in Q1FY17 to Rs 8,006 crore in Q1FY18 due to a one-time profit on sale of investment made a year ago.

The bank will need to make additional provisions of 85.71 billion rupees this financial year for its exposure to 12 large borrowers which have been taken to bankruptcy court, SBI said.

SBI already merged its 122 administrative offices and 524 branches and expects to complete the entire exercise of rationalisation with an expected savings of Rs 1160 crore from this by September.

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