Mumbai: State Bank of India on Friday posted a muted net profit of Rs 838 crore in Jan-March period of last fiscal on account of massive provisioning at Rs 16,502 crore, but the asset quality moved northwards as gross and net NPAs both declined and interest incomes rose.
Apart from high provisioning, the bank also saw slippages. But the silver line is the asset quality improvement, for which the street gave a thumbs-up to the result. The net interest margin was up at 2.94% . So was the net interest income (NII) that grew by 14.92% y-o-y to Rs 22,954 crore in Q4FY19.
State Bank of India, the country's largest lender, made a profit of Rs 862 crore in the financial year 2018-19 after reporting losses in the last two years.
The NPA provisioing was also up at a huge Rs 17,336 crore in Q4. The lender's fresh slippages came in at Rs 7,505 crore in the last quarter against Rs 4,523 crore in December quarter. Gross slippages stood at Rs 7,961 crore in Q4.
"Corporate slippages for the quarter at Rs 2,284 crore included Rs 1,220 crore slippages towards the aviation sector," said bank chairman Rajnish Kumar.
The lender's NII, which is the difference between interest earned and interest expended, increased 18.03 per cent to Rs 88,349 crore in FY19 versus Rs 74,854 crore in the previous year.
The bank's operating profit (EBITDA) for FY19 dipped 6.85 per cent to Rs 55,436 crore as compared to Rs 59,551 crore in FY18. The bank's provisions and contingencies declined by 31. 82 per cent to Rs 54,574 crore from Rs 66,058 crore last year.
In Q3 (Oct-Dec) period, it had posted a net profit of Rs 3,954.81 crore while same period a year back, it had posted a loss of Rs 7,718 crore.
In Q4, its interest income is up 15% on yearly basis at Rs 22,954 crore. Its provision coverage ratio was 78.73% as on March 31, 2019 vs 74.6% QoQ. Its operating profit was up 6 per cent at Rs 16,933 crore versus Rs 15,883 crore, YoY.
The gross NPA stood at Rs 1.72 lakh crore , 8.5% down from Q3. Its net NPA is at 3%, down 94 bps from Q3. Its gross NPA for Q4 stood at 7.53% vs 8.71% QoQ.
"The gross NPA is down from 10.91% to 7. 53% and net NPAs (is now just 3%) are substantially down. The provision coverage ratio is 79%. This shows that the balancesheet of the bank has been fully repaired -- the impact of the shadow of the past will not be there on the earnings of the bank", Kumar said.
He said the recovery during the year was Rs 37,000 crore which was an all-time high. Out of this Rs 13,836 crore came through the IBC process. For NCLT 1, he said the PCR is 99%.
"All the three major accounts --Essar Steel, Alok Industries and Bhushan Power and Steel which are in very advanced stage of resolution -- we have made 100% provision. As a results almost Rs 16,000 crore is recoverable as soon as the juducial process is over", he said.
About corporate loans, the provision covergae ratio, the writeen-off accounts, it is 83% and without the written-off accounts, it is 70.6%. As March 2019, the net NPA in corporate book is Rs 34,000 crore and the slipaage ratio is 1.6% for the year. For H2 , it is 1.16% and the credit cost is 2.66%. For the fresh slippages, the credit cost is 0.52%.
"Rather than going for the temptation of declaring higher net profit, the bank has kept the money for provision. From March 2020, there will be no legacy cost on corporate books," he said.
As on December 2018 quarter, the NPA amount on SMA 1 and 2 were Rs 17,000 crore but now on March 2019, it is only Rs 7,000 crore.
"So, it is reduction in NPA, rise in PCR, and in terms of the asset quality in future, SMA 1 and 2 is a good indicator that shows that there is overall asset quality improvement," said Kumar.
"We are not going for assets that guzzle the capital. We are focussed on managing the risk-weighted assets, he said.