India's largest lender, the State bank of India (SBI) disappointed with its third quarter earnings. Not only has its asset quality worsened further, net profit and net interest income (NII) have come in below estimates with NII seeing a fall compared to the same quarter in the year ago period.
SBI's net profit rose at a slower pace by only 4 percent year-on-year to about Rs 3,400 crore on the back of lower net interest income, which declined nearly 3 percent Y-o-Y to Rs 11,154 crore during the same period.
Pratip Chaudhuri, chairman of SBI is hopeful for Q4 earnings as he considers it to be the best quarter due to clearance of government dues. "Q4 should be a very good quarter regarding the non-performing assets (NPAs) and the recovery process," he told CNBC-TV18.
Going forward, Chaudhuri does not feel any stress on the earnings and adds that the current restructuring pipeline is about Rs 2700 crore.
Below is the verbatim transcript of Pratip Chaudhuri's interview on CNBC-TV18
Q: Can you take us through the Q3 slippages?
A: Upgradation has been higher but the recovery slippage number should be seen differently. Out of the total slippage number Rs 2000 crore has already become standard post their restructuring. As of December 2012, the restructuring was not complete so that has now happened. However, this is indicative or is a consequence of overall stress in the economy where companies a) are finding the demand to be inadequate and b) are not able to generate enough margins.
Q: Going forward, are you looking at a turnaround or do you see the current run rate of slippages and restructured accounts?
A: No, not particularly because the stock markets have improved so it looks that people have a more promising outlook. They are more hopeful of the future. Q4 is generally our best quarter because many of the accounts which have become delinquent due to delayed realisation of receivable from government department, much of their dues are cleared in Q4. So, Q4 should be a very good quarter regarding the NPAs and the recovery process.
Unless economic improvement happens, the loan demand will not be very robust. However, we have seen very good loan demand because we are beneficiary of shifting of loans from other banks. For the system as a whole, the loan demand would be muted unless the recovery happens.
Q: How is the restructuring pipeline looking, although the number of restructured accounts this quarter has been very low? What kind of pipeline are you looking at and are you seeing more stress?
A: No, we are not seeing more stress. The restructuring pipeline currently is looking at about Rs 2700 crore.