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May 18, 2012, 11.25 AM IST
India's largest lender State Bank of India will declared its fourth quarter results today. In an interview to CNBC-TV18, Sampath Kumar of IIFL Institutional Equities says, he sees slippages anywhere between Rs 6,000-8,000 crore on gross basis.
According to him, expectations are high at this point of time. “I don’t think there can be a surprise. The only hope is there should not be a negative surprise,” he adds.
Below is the edited transcript of his interview with CNBC-TV18's Udayan Mukherjee and Mitali Mukherjee. Also watch the accompanying video.
Q: Do you think SBI can surprise on the positive side today?
A: I think expectations are high at this point of time. So, to that extent, I don’t think there can be a surprise. The only hope is there should not be a negative surprise.
Q: What do you expect slippages to be like in this quarter? How much restructuring there may be in Q4, what are your estimates?
A: Slippage is looking anywhere between Rs 6,000-8,000 crore on gross basis. The management has been saying that it is going to be lower than what we have seen in Q2 and Q3. It has been to the order of Rs 8,000 crore in each of these quarters.
On restructuring side, there is not very large pipeline that got through in the Q4. Particularly SBI doesn’t have any large exposure either to Air India or SEBs, which were big ticket items, which went through in the Q4. To that extent, SBI should report somewhat lower restructuring number compared to Bank of Baroda or Punjab National Bank. That should be to the order of Rs 4,000-5,000 crore this quarter. The key will be what is going to happen in this financial year.
Q: Most people are not expecting too much damage on net interest margins (NIMs) or even the loan growth to slowdown very dramatically. Everybody seems to be focused more on asset quality picture. Do you think there could be anything on that which surprises the street, either very sharp spike in provisioning etc which you are expecting today?
A: The reason to focus on asset quality is because ultimately that will drive the provisions. If asset quality slippage numbers come down lower, say Rs 6,000 crore or below, even if provisions were to remain higher, I think market will take it well. That is because you are building more buffer against future problems. So that extent the market is focusing on right issues.
Provisions, I don’t think can be lower than what we have been seeing in Q3. SBI will have to maintain a run rate of anywhere between Rs 3,000-4,000 crores. There are two things one must remember. One, provision coverage is 62-63%. That needs to go up. While it is not very different from many other banks today, but if you look at where RBI is headed in terms of its policy, in terms of its provisioning and everything else, it will all point to higher provision coverage in the future. So, making higher provision through the P&L should not be a negative surprise as long as it is not accompanied with any negative surprise on slippage.
Q: Bank of Baroda surprised negatively. There were sudden cracks that showed up in the portfolio there as well. On SBI, any specific sectors that you would be worried about, aside from aviation, because this time around SEBs as well has caused a bit dent for some of these banks?
A: Fortunately, SBI doesn’t have very large exposure to either SEBs or to Air India for that matter. So, to that extent, the lumpiness we saw in some other banks, we will probably not see in SBI. And that is the reason why SBI balance sheet being larger, we are not looking at a very large additions to restructuring this quarter once again.
Another factor, which has been encouraging in the case of SBI, has been if one looks at the first nine months, so far they have added very little to their restructured loans. That means they have taken the problems head on, they are recognised more as a non-performing loans (NPLs) and less as restructured loans. That is big positive in a way because as long as they recognise those problems, put through the provisions in the P&L then you have less stress going forward.
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Jun 19 2013, 11:28
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