State Bank of India, India’s largest lender on Thursday reported a 62% fall in net profit in the December quarter due to higher provisioning for sticky loans, extending the bad run for public sector banks that started this week with an unprecedented 90% drop in profits at Punjab National Bank.
The sharp fall at India’s largest banks that lend to some of the biggest companies of the country, worried investors who dumped stocks leading to almost Rs 3-lakh crore of investor wealth getting eroded in a single day.
The concerns were mostly centred around the possibility of rising bad loans and about banks’ ability to clean them. Public sector banks which have set aside about Rs 70,000 crore to make up for bad loans, wrote off a total of Rs 114,000 crore of such sticky debts between 2013 and 2015, according to RBI in response to an RTI query.
“We are working on workouts (resolution of bad assets)…some have happened while some have not. This is not something that has suddenly happened. The only difference is that some workouts have not happened on time as we were hoping, and will happen. I see no reason why there should be worries on how it will grow going forward,” SBI chairperson Arundhati Bhattacharya told reporters.
SBI said its stand-alone net profit in the Oct-Dec quarter fell to Rs 1,115 crore from Rs 2,910 crore in the previous year. Gross NPA rose 20 basis points to 5.10% in Dec 2015, compared to 4.90% in Dec 2014. The bank’s total interest Income increased from Rs 38,546 crore to Rs 40,553 crores.
While Saday Sinha, a banking analyst with Kotak Securities said that non-performing loans spiked for SBI on account of RBI’s asset quality review,” Reliance Securities said the results were below estimates. “Assets quality deteriorated during the quarter as the bank partially accounted the impact of stressed account review conducted by RBI,” the brokerage added.
Elaborating on the steps taken, SBI’s Bhattacharya said that half of RBI’s asset quality review requirement have been recognised in this quarter. “We expect similar numbers next quarter. Those provided for are largely in steel, textile and power.”
SBI has 13 accounts under the 5/25 scheme, a debt restructuring scheme, amounting to Rs 16,951 crore with 7 accounts in the third quarter, worth Rs 7,743 crore. The bank chairperson also pointed at the delay in bankruptcy cases compounding the situation. “We have more than 25,000 cases pending in DRTs(debt recovery tribunals). The resolution process needs to be looked at,” said Bhattacharya.