State Bank of India expects NPA resolution to increase costs in FY18
In the post-earnings press conference, Arundhati Bhattacharya said, “We do expect, we will need to take some pain in FY18 as the resolutions take place but FY19 things will get better.”
State Bank of India (SBI) expects pain to remain elevated on the provisions towards bad assets as the resolution process will take place this year.
Posting strong fourth quarter results for the last time as a standalone entity, SBI Chairman Arundhati Bhattacharya said, “In FY18, we will still see slightly elevated credit costs as the resolutions take place as we will need to make provisions upfront and though we have asked to spread out some provisions over a few quarters, that is still not available.”
In the post-earnings press conference, Bhattacharya said, “We do expect, we will need to take some pain in FY18 as the resolutions take place but FY19 things will get better.”
Even today resolutions need some dispensation, she added.
With National Company Law Tribunal (NCLT) and Reserve Bank of India's (RBI) revised guidelines on the Joint Lenders’ Forum (JLF), Bhattacharya expects resolutions to pick up this year.
The Country’s largest lender, which has now merged with its five associate banks and Bharatiya Mahila Bank from April 1, is now four times the size of the second largest lender, Punjab National Bank.
SBI on Friday reported a 122 percent jump in net profit for the fourth quarter at Rs 2,815 crore, on a sequential basis. This sharp rise in profit came on the back of higher interest income and lower provisions, given the reduction in bad loans.
The government-owned bank made a profit of Rs 1,264 crore in the same quarter last fiscal.
Provisions towards bad loans declined 9 percent to Rs 10,993 crore while towards standard loans it declined by over 70 percent to Rs 289 crore during the quarter.
SBI made provisions of Rs 1,700 crore over and above the requirement.
The bank’s gross non-performing assets (NPAs) reduced to 6.90 percent of total loans as on March end 2017, down from 7.23 percent in the December quarter but higher from 6.50 percent a year ago.
Net NPAs also substantially improved to 3.71 percent from 4.24 percent in the third quarter and 3.81 percent from a year ago.
The pace of fresh slippages also reduced during the quarter and stood at Rs 9,755 crore compared to Rs 10,185 crore in Q3FY17.
In its notes to accounts, SBI said that the regulatory requirement does not require it to disclose any divergence of assessment in bad loans between the bank and the RBI.
Loan growth remained subdued during the quarter and the financial year with net growth at 1.4 percent year-on-year (YoY). Domestic advances rose by 8 percent (YoY) backed by 21 percent retail loan growth (YoY), especially in auto, home and personal loans.
SBI plans to remain cautious in its further exposure to the telecom sector, where the loan growth declined by 12 percent (YoY). Large corporate loan growth edged up by 3.6 percent (YoY) in 2016-17, while mid-corporate loans remained flat.On the bank's growth outlook, Bhattarcharya said, “The overall direction of the economy is upwards and to that extent there is belief that the weaknesses in some of these segments has been recognised and remaining should be able to get through to performing in the near future.”