Ground work to resolve the nonperforming loans’ (NPL) issue has been completed but couple of more quarters need to go by before results start showing says, State Bank of India’s MD-Corp Banking Group B Sriram sharing his outlook on performance in the coming quarters with CNBC-TV18.
The country’s largest public sector lender reported 134 percent jump in net profit for the third quarter to Rs 2,610 crore from Rs 1,115.34 crore in year-ago quarter.
Fresh slippages into NPAs (non-performing assets) marginally declined in Q3 to Rs 10,185 crore from the previous quarter of Rs 10,341 crore. Sriram says while slippages may remain contained at 2.59 percent this year, next year it could be lower.
On media reports of the government planning to introduce 'Indradhanush 2.0', a comprehensive plan for recapitalisation of public sector lenders, Sriram said the bank is already adequately capitalised.
SBI has guided for a loan growth of 11 percent in FY18 and Sriram expects the retail segment to drive this growth.Also read: SBI could be one of the early gainers of an upturnBelow is the verbatim transcript of B Sriram’s interview to Anuj Singhal, Latha Venkatesh & Sonia Shenoy on CNBC-TV18.Latha: There is a talk, it is actually a Press Trust of India (PTI) report that there is an Indradanush 2.0 plant which is looking at further recapitalising banks according to their needs. Is there anything that you have heard and should one expect more capital for State Bank of India (SBI)? A: No, I haven’t heard anything specifically on this Indradanush 2.0. However, our bank SBI has been well capitalised, as you see the results of quarter three as well, we are at about 13.73 percent. If you take the additional 80 basis points, 79 basis points that come out of 40 basis points on the profits accruing for the current year and the remaining 39 basis points on the government equity that came in quarter four I think we are well in excess of 14.50 percent which is quite adequate for us at the moment. Latha: Let me come to what is the main issue of discussion the slippage number. At Rs 10,000 crore the street was extremely happy that it is not a nasty shock at all, but 97 percent of that is corporate slippages. Usually, you have goodish bit of non-corporate slippages as well should we expect that because of the Reserve Bank of India (RBI) dispensation some of this have been postponed. Should we prepare ourselves for anything - for a big slippage number for the non-corporate segment in the fourth quarter?A: No, we have already disclosed a figure of Rs 2,002 crore which is the retail portfolio which has been affected by the postponement by the RBI guidelines. Now that is an amount which is actually effort elastic and I am sure a considerable part of that in quarter four will be tried and brought back. But, the total amount that has been identified and also disclosed by the bank is Rs 2,002 crore in quarter three which has been affected by the regulatory guidelines. As regards corporate slippages, we have given a guidance of about Rs 40,000 crore for the current year. The slippage ratio of 2.59 that we have maintained till quarter three, we are quite hopeful that we will be within the guidance that we gave early in the year for the full year.Sonia: What could the possible addition to the watch list be in FY18 and will the quantum of the watch list be much lower than what we saw in FY17?A: We are yet to sit down and look at the watch list for the next year. We will have to sit down after quarter four and then try and see as to what is the way ahead for the next year. We do feel that the slippages will tend to go down as we go into FY18 and FY19.Sonia: Also your loan growth guidance was cut sharply. You have about 10-11 percent for FY18 and I think 6.5 percent for FY17. I just wanted to understand, this quarter post demonetisation we saw growth in the SME sector was at its worst. It has fallen about 11 percent. Any improvement there and do you think retail will continue to drive loan growth for you even in FY18?A: Yes, retail will continue to be quite buoyant and we have grown by about 18 percent -18.3 percent in home loans and about 20 percent in car loans. I think, another personal loans we have grown by about 15 percent. This buoyancy will continue in the next year. As regards corporate loans, there is Rs 32,000 crore of increase in commercial papers which is actually the highly rated corporate have moved to short-term commercial papers. There is a growth of about Rs 7,000 crore on corporate bonds. In addition, we also lost about Rs 12,000 crore on the repayments of the advances against FCNR deposits which matured in quarter three. So, all in all, if you factor in all that actually the growth has been in excess of about 7 percent. So, while going forward, we would imagine that the mix between market borrowings and loans especially for higher rated corporate will continue and to that extent I would imagine that the 11 percent growth target that we have kept for next year is quite realistic and achievable.Latha: What is your sense about margins next year? Will they be better, I mean is there any scope at all for ending rate cuts and how much scope is there for deposit rate cuts?A: There are two factors which have to be monitored. One is of course the amount of deposits that will go out post the relaxation and the withdrawal limits that has happened and after March 13th specifically. So, we will have to wait till April to find out exactly where we stand in terms of the low cost current account – saving account (CASA) deposits and thereafter take a view on that. The second part is of course the credit growth and if it continues to be within our range of 11 percent then I would imagine that the margins would not go down as much as we are targeting it to be.Latha: They won’t rise, do you think – margins?A: As I said it depends on first factor – in the sense that how much of the CASA deposits is likely to go out. Latha: At the moment there is a ball park – I mean 40 percent was what people was talking about. Is there any better sense now?A: It is difficult to forecast at the moment. We have been saying that it could be between 15 percent and 40 percent is what we have steadfastly remain. I would imagine that at the moment we continue to be at same range, but probably in the higher areas of the range.Sonia: In terms of a timeline not just for yourself but for the industry as well how much longer do you think it could take for non-performing loans (NPLs) to peak and is there faster resolution of stressed assets now compared to what we saw few quarters ago?A: As regards NPLs, we have been working on it for almost a year and the half now and we have come to a slightly more advanced level in terms of trying to find resolutions on that. But, we will have to wait it out for another couple of quarters in terms of trying to see whether we can resolve a few large ones. So, while the work has been done, I think all the background speed work has been completed, we will have to figure out as to get the banks on the same page and try and work out a resolution which is good for the banking system. Latha: Should we expect something in FY17 itself? Any of the big boys Essar Steel, Bhushan Steel and Electrosteel there are so many of them that we understand are in advanced stages of resolution?A: I won’t like to comment on specifics, but I am not very sure whether any of the big ones will be addressed in because we have just about a month or so left. Probably, going forward into FY18 early part, we should be able to get some.
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