SBI boss tries positive spin on Q1, mkt unmoved

Moneycontrol Bureau

SBI shares continued to be under pressure, down over 4% at Rs 1889, even as chairman Pratip Chaudhuri tried to draw attention to the positives in the first quarter performance.
At the outset, Chaudhuri said that the numbers should be compared on a year-on-year basis and not quarter-on-quarter basis, as the first quarter is usually weak in terms of credit offtake. The net profit figure of Rs 3752 is the highest ever for the first quarter, and in absolute terms, only next to Reliance Industries quarterly net profit. Chaudhuri claims a quarterly net profit of over Rs 3000 crore is the 'new normal' and that this performance can be sustained going forward. While conceding that loan loss provisions have been slightly higher at Rs 2790 crore, he says that the bank "did not have to scrimp on provisioning" and was able to "comfortably meet provisioning norms."
The bank restructured Rs 562 crore of loans during the quarter, and its cumulative restructured loan book stands at Rs 37,000. Going by past data on the percentage of The bank saw a jump in non-performing assets in its agri loan book, but Chaudhuri is confident that much of those NPAs will be reversed in current quarter. That appears a tall order, given the looming drought situation in many parts of the country. Also, loans to the agri sector rose 26% during the June quarter.
Chaudhuri says the small and medium enterprise segment poses a bigger threat of NPAs, than large corporates, where the bank has been able to check the rise in NPAs.
SBI was able to check rise in employee cost to around 6% on what Chaudhuri says is a “demographic dividend.” About 7000 employees retired over the last year, and these have been replaced by employees drawing much lower salaries. Chaudhuri says the bank will be able to benefit from this trend for the next 10-15 years. The bank has also managed to limit the growth in other overheads to about 11%.
The bottomline got a boost from a Rs 521 crore appreciation in the mark-to-market value of its treasury portfolio. Also, Chaudhuri says the banks equity portfolio has "stopped hemorrhaging".
But the market is not convinced yet. Most analysts see a huge spike in non-performing assets going forward, because of the slowing economy. Another reason for investors to be worried is that State Bank of India (and most state-owned banks for that matter) is more vulnerable to political meddling, compared to private sector banks. Market thinks there is a strong possibility of farm loan concessions (or even a waiver upto a certain threshold) because of deficient rainfall. With general elections less than two years away, other populist measures too will be in the offing.