SBI posts higher profits for first quarter of FY 16

From 5.7 per cent GNPA levels and slippages of about ₹11,000 crore during the December 2013 quarter, the bank has been able to contain fresh slippages over the past few quarters.

While larger private banks are still delivering healthy returns – return on assets (ROA) at about 2 per cent – SBI has seen its ROA fall below 1 per cent in the June quarter.

However, SBI shares fell by 4.87 per cent to Rs 269.30 per cent on the stock exchanges as the domestic net interest margin of the bank fell from 3.54 per cent to 3.29 per cent in the first quarter due to the reduction in the Base Rate by 30 basis points and subdued growth of 5.38 per cent in advances.

State Bank’s gross nonperforming-asset ratio widened to 4.29 percent in the June quarter from 4.25 percent as of March 31, the filings showed. The bank’s net interest income (NII) grew a meagre 3.6 per cent compared with the same quarter past year. “And with some amount of confidence I can say that the recovery is having a beneficial impact on the books”, she told a news conference on Tuesday. “In the next 3-4 quarters, I expect the mid-corporate portfolio to stabilise”. Policy makers’ efforts to boost the economy have yet to ignite credit growth at Indian banks, which is sputtering near the slowest pace since 1994. On the SME side too the revamped products are getting back into the market. “The net interest margin declined to 3% in Q1-FY16 as compared to 3.13% in Q4-FY15, as bank had cut the base rate by 30bps during previous quarter”, said Saday Sinha, banking analyst, Kotak Securities.

SBI Chairperson Arundhati Bhattacharya sounded optimistic on the asset quality front, saying the worst is sort of behind the bank. SBI’s core strength has been its high CASA and fee income, which has supported its core profitability in challenging times. “We recommend an ACCUMULATE rating on the stock”.

SBI’s steep rise in slippages in the June quarter comes after a not-so-bad performance by some of its peers, such as Bank of Baroda and Punjab National Bank. Power sector and infrastructure sector things are improving. Now, we need to understand what is the quality of slippages.