State Bank of India chairperson Arundhati Bhattacharya Thursday said mid-level corporates and small firms among the bank’s clientele continue to face working capital pressure.
SBI Wednesday reported a 35 percent year-on-year decline in its quarterly net profit, but the rate of increase in bad assets slowed down, drawing applause from the stock market.
In an interview to CNBC-TV18’s Latha Venkatesh, Bhattacharya said the trend had to sustain for the next three quarters for her to be able to conclude that the worst was over for the bank.
Bhattacharya says good monsoon will help reduce NPAs in the agriculture sector, and said the bank was doing its best to keep slippages--the term to used to describe a restructured loan becoming an NPA--under control.
Fresh slippages declined to Rs 8365 crore from Rs 13,766 crore quarter-on-quarter. But restructured loans rose sharply to Rs 8585 crore and recovery of bad loans fell to Rs 1414 crore, compared to Rs 4064 crore in the June quarter.
Bhattacharya said she would not resort to ‘kitchen sinking’, term being described by analysts to purge the book of bad loans at loan.
“A few people had even recommended that I go ahead and do this, but I have no intention of doing anything of this sort. We will be doing our best (to improve asset quality) and what is right for the bank, but we will not do anything that takes away all the bad loans in a shot,” she said.
It may be recalled that Bhattacharya’s predecessor Pratip Chadhuri had chosen to clean up the books immediately on taking charge in April 2011, leading to a 99 percent drop in quarterly net profit.
Bhattacharya refuted market talk that the bank was trying to make its numbers look good ahead of its planned Qualified Institutional Placement (QIP) for raising funds.
“I think our investors will best believe us we give them a performance that stands up to reason. There is no reason why I should try and shepherd things in a manner that shows our bank in a better light than what actually is,” she said.
She conceded that the sharp rise in operating expenses (nearly 50 percent) was a cause for concern and that the bank was trying its best to restrict it. Bhattacharya said a large chunk of the increase in operating expenses during the September quarter was due to provisions for wage hikes and higher pension liability.
SBI shares were up 2 percent this morning to Rs 1728, building on the previous day’s rise, as analysts reaction to the numbers has been broadly positive.
Yet, some analysts feel SBI may not be out of the woods yet.
“While seasonality and shift to restructuring may have helped SBI to put up good show to some extent on NPA front for Q4FY13, we believe that in the backdrop of weak macro economic scenario and higher restructuring, the relapse of the problem can not be denied,” Emkay Global analysts Kashyap Jhaveri, Pradeep Agrawal and Aalok Shah wrote in their review report.“In such scenario, the focus continues to remain on core operating performance which has been weak and may compromise SBI’s ability to sustain continued asset quality shock,” the report said.
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