SBI posts worst quarterly profit in 2 years; net plunges 35%

 
Mumbai: State Bank of India on Wednesday reported its worst quarterly profit in over two years with a sharp 35 percent drop in earnings at Rs 2,375 crore in the three months to September, hit hard by higher provisions for staff expenses, bad loans and investment depreciation.

Standalone total income was Rs 37,199.92 crore as against Rs 32,953.47 crore in the same period a year ago.

"Provisions for loan losses, provision for the staff wage hikes, provision for pensions and of course the investment depreciation were the reasons for dip in the net profit in the quarter," the newly-appointed SBI chairman and managing director Arundhati Bhattacharya said.

This is the worst quarterly performance of the nation's biggest lender since the massive 90 percent plunge which brought the bank's net profit to just Rs 20.88 crore for the March 2011 quarter. Pratip Chaudhuri had taken over as chairman in April, 2011.

"Also, the fact that we have really not been able to book that kind of income on sale of investments as we had been able to do in the first quarter, due to the fact that interest rates have actually hardened. All of this accounted for lower bottomline," Bhattacharya said.

This is Bhattacharya's maiden earnings report after she took over charge on October 7 as the first woman head of SBI which controls nearly a quarter of country's banking assets.

SBI's total provision rose 6.53 percent to Rs 3,937 crore as against Rs 3,696 crore in the same period last year.

Despite the poor set of numbers, the market lapped up the SBI counter, which is down around 50 percent from its lifetime high. Today, the SBI counter closed 1.34 percent higher at Rs 1697.85 on the BSE, whose benchmark Sensex shed 0.45 percent.

Saday Sinha, banking analyst at Kotak Securities said the bank's net interest margin (NIM) at 3.2 percent was ahead of his expectations on the back of a 19 percent loan growth.

However, the profit after tax (PAT) came a shade below expectations due to higher-than-expected operational expenditure and Non-Performing Assets (NPA) provisions, he added.

During the quarter, major slippages came from the power sector (Rs 1,700 crore), iron and steel (Rs 600 crore) and infrastructure (Rs 700 crore), said SBI chief financial officer and deputy MD RK Saraf.

Although the bank's slippages of 3.1 percent is lower than the previous quarter, asset quality pain persists for the stock with net addition to impaired assets remaining at elevated levels, Kotak's Sinha said.

Staff expenses jumped 36 percent to Rs 5,819 crore from Rs 4,280 crore in the same period last year, while salary expenses jumped 26.74 percent to Rs 4,536 crore.

Provisions for pension rose 108.62 percent to Rs 1,054 crore in the quarter as against Rs 505 crore a year ago.

"The staff expenses have gone up quite sharply on account of the fact we have to make 15 percent provisions for the wage negotiation. We are also having to make additional provision on account of the fact that the LIC has changed the mortality table," Bhattacharya said.

According to LIC's new mortality table, the life expectancy has increased to 81 years.

At the end of the reporting quarter, the bank's gross non-performing assets (NPAs) rose to 5.64 percent of gross advances, compared with 5.15 percent year a year ago. Net NPAs also rose to 2.91 percent from 2.44 percent. However, on a sequential basis, NPAs declined by 39.23 percent.

Net interest income in second quarter increased 11.64 percent to Rs 12,251 crore from Rs 10,974 crore a year earlier.

Domestic net interest margin (NIM) increased sequentially to 3.51 percent in the quarter from 3.44 percent last year.

Deposits grew 14.01 percent to Rs 12,92,456 crore in quarter as against Rs 11,33,644 crore, while gross advances jumped 19.18 percent to Rs 11,39,326 crore.

"Right now, our deposit growth on year-on-year basis is at 15 percent and we expect to be able to grow at the same manner on the deposit side. On the credit side, we have to see how it happens, but currently we will maintain between 16 to 18 percent," Bhattacharya said.

The domestic credit deposit ratio increased from 76.64 percent in September 12 to 80.54 percent this quarter, a jump of 390 basis points.

SBI had seen an investment depreciation of Rs 8 crore as against loss of Rs 260 crore in the year-ago quarter with the depreciation on domestic banking side being Rs 237 crore as against a loss of Rs 257 crore.

The bank had booked a loss of Rs 229 crore in investment depreciation on foreign banking side as against a loss of Rs 3 crore.

"We were able to amortise the dip that has come on the treasury side. While on the domestic side there was a write in where as on foreign offices side there has been a write back. The net figure which has come is only Rs 8 crore," Bhattacharya said.

"This means for the next two quarters we will have amortised an amount of market-to-market, that will have to be taken, which will be in the range of Rs 700 crore."

During the quarter SBI shifted Rs 56,000 crore of SLR securities to held-to-maturity category.

Bank's provisions for income tax declined by 51.45 percent to Rs 908 crore as against Rs 1,870 crore.

Provisions for loan loss jumped 43.99 percent to Rs 2,646 crore as against Rs 1,837 crore.

Interest on loans rose 12.60 percent to Rs 25,379 crore as against Rs 22,538 crore. Interest on resources jumped 20.64 percent Rs 8,243 crore as against Rs 6,833 crore.

Total interest income rose 14.58 percent to Rs 33,922 crore as against Rs 29,607 crore.

Interest on deposits increased 13.96 percent to Rs 19,277 crore from Rs 16,916 crore, while interest on borrowing jumped 106.30 percent to Rs 1,468 crore as against Rs 711 crore due to increase in MSF rates and tight liquidity condition.

The bank's total restructured accounts stood at Rs 52,437 crore and has debt restructuring pipeline of Rs 6,000 crore which could be implemented in rest of the two quarters or may be next year, Bhattacharya said.

Talking about the outlook, Bhattacharya said the bank will continue to face tough situation as "we are not seeing those indicator that say things are beginning to look brighter".

However, she said the bank is seeing robust demand on the retail loan side. "But if you look at the stresses in the account, the stresses continue and we are not seeing stresses to have lessened to very great extent, specially in the mid cap and the large SME segments."

SBI raises lending rates by 0.20%, Axis Bank revises FD rates

New Delhi: Days after RBI hiked policy rate, country's largest lender State Bank of India (SBI) on Wednesday raised its lending rate by 0.20 percent to 10 percent, a move that is likely to be followed by other banks.

The bank has revised the base rate or the minimum lending rate to 10 percent from 9.80 percent effective Thursday, SBI said in a statement.

With the revision in base rate, EMI for home, auto and consumer durable loans will go up. However, the bank is offering new loans at concessional rates for a limited period ending January 31, 2014.

At the same time, the Benchmark Prime Lending Rate (BPLR) was also raised by 0.20 percent from 14.55 percent to 14.75 percent.

Private sector lender, Axis Bank has also revised the interest rates on select maturities for fixed deposits amount less than Rs 1 crore. In two buckets there has been upward revision of 0.25 percent while there is downward revision of 0.25 percent in 9 buckets.

Term deposit between 13 to less than 15 months now attracts 8.75 percent, up by 0.25 percent.

At the same time, there has been 0.25 percent decrease in various buckets between 61 days to less than six months to 8.25 percent.

Similarly, various buckets between 6 months to less than 11 months the decrease is by similar percentage points to 8.5 percent.

In case of term deposit between 46-60 days, rates have been revised downward by 0.5 percent from 8.5 percent earlier.

The new rates are effective from November 1, according to Axis Bank website.

SBI's decision came a day after HDFC Bank raised the base rate by 0.20 percent to 10 percent.

Commenting on the base rate increase, SBI Chairperson Arundhati Bhattacharya said it is on account of the rise in cost of funds.

Repo rate has gone up by 0.50 percent since SBI had last raised it, she said, adding, the bank has not raised rates to that extent but by only 0.20 percent.

It is in line with the market and the bank base rate still remains one of the lowest, she added.
Earlier this month, SBI raised fixed deposit rate by 0.2 percent on select maturity.

With the revision, term deposit between 180-210 days less than Rs 1 crore now earn 7 percent against 6.80 percent earlier.

Soon after RBI policy announcement on October 29, Bhattacharya had said: "This is something which the ALCO (asset liability committee) will come to a view on. But yes, some rate change is expected...Which way and what, you need to wait till the ALCO meets and takes a view on it."

RBI raised short-term lending (repo) rate by 0.25 percent to 7.75 percent, making cost of fund expensive for the banks.

At the same time, the RBI lowered marginal standing facility (MSF) rate by a similar margin to 8.75 percent.

Accordingly, the bank rate was reduced to 8.75 percent with immediate effect. Consequently, the reverse repo rate is adjusted upward to 6.75 percent.

The RBI has left unchanged other rates such as the cash reserve ratio at 4 percent and the mandatory holdings in government securities and other liquid assets as a solvency measure - Statutory Liquidity Ratio (SLR) - at 23 percent.

SBI had last raised base rate by 0.10 percent to 9.80 percent in September this year.

SBI chairman rules out lending rate hike

A day after steeply hiking bulk deposit rates, SBI chairman Pratip Chaudhuri on Friday ruled out any hike in lending rate, although many private sector banks have done so due to the uptick in the cost of funds following RBI's liquidity squeezing moves. "Currently no," said the head of the nation's largest lender when asked if a base rate hike is being planned following its up to 150 bps hike in bulk deposit rates. Top private sector lenders such as ICICI Bank, Axis Bank and HDFC Bank have raised their base rates or the minimum lending rate following the recent tightening by the Reserve Bank to arrest the fall of the rupee since July 15. The domestic currency has lost more than 21 per cent against the US dollar since April. Industry insiders say state-run banks may not increase lending rates due to "diktats from the Finance Ministry". Andhra Bank, whose chairman B A Prabhakar retires tomorrow, is the only PSB which has hiked its rate by 0.25 per cent early this month. He said Andhra Bank's move is an exception as "the cost of funds is quite modest. Our base rate has always been low, that is our hallmark because deposit collection is efficient. Our average cost of funds is only 6.7 per cent." Chaudhuri, who will be retiring by next month-end, said the bank has decided to raise rates -- generally seen as a precursor to a similar action on lending rate -- on deposits of over Rs 1 crore. State Bank of India has the smallest composition of such bulk deposits, the pricing of which the bank raised by up to 1.5 per cent on Thursday. However, there will not be any deposit rate hike for deposits under Rs 1 crore, the SBI chairman said. In a series of moves, including capping banks' overnight borrowings, RBI has squeezed the liquidity, sending short-term rates to a high of 300 bps to 10.25 per cent. Chaudhuri reiterated that banks with a higher reliance on short-term instruments like certificate of deposits and commercial paper are the ones raising their rates. Meanwhile, he said the bank will announce the name of one associate bank for merger by end of September. When asked his reaction to the dismal GDP data of 4.4 per cent for the April-June quarter, Chaudhuri said: "As a banker, it does not affect me. Stock market people give a PE multiple base on growth, but as a banker I am only concerned whether they are servicing my debt. I am not too focused on where the stock market is going."