SBI plunges 4% as bad loans continue to rise in Q1

State Bank of India shares plunged over 4% to Rs 1885 after announcing its first quarter numbers, as the bank’s asset quality continued to deteriorate.

While net profit jumped 136% year-on-year to Rs 3752 crore, investors were unnerved by the steep rise in non-performing assets.

Gross NPA as a proportion of total advances for climbed to 4.99% in the June quarter, from 4.44% in the preceding quarter. Net NPA rose to 2.22% from 1.82% quarter-on-year.

And most analysts expect the asset quality to worsen going ahead, because of the slowdown in the domestic economy. SBI’s overall credit grew 20% to Rs 9,45,819 crore year-on-year, of which loans to the agriculture sector jumped 26% to Rs 1,20,130 crore. With the monsoon this year turning out to be deficient, analysts expect a sizeable chunk of the farm loans to be under pressure. Earlier in the day, brokerage house UBS rated the stock a ‘sell’ citing worsening asset quality as one of the key reasons.

The bank's net interest income for the quarter rose 14.6% to Rs 11,119 crore, as a 23% rise in borrowing costs ate into the profit margins. The bank’s operating income rose 10.5% year-on-year and operating profit, 13%.

The bank said its average cost of deposits rose 58 basis points to 6.24% from 5.66% last year, while yield on its loan improved by only 43 basis points to 10.86%.

On the positive side, SBI's deposits grew 16% to Rs 11.02 lakh crore, and savings deposits (which account for 35% of total deposits) rose 13.36%.

Net profit of associate banks rose 28%, and SBI Life Insurance reported a net profit of Rs 163 crore.