SBI Q1 net up 137%, but NPAs hurt Shares Slide 4% As Rising Bad Loans Spook Mkts Despite 3,752Cr Profit

Mumbai: State Bank of India (SBI) has reported a net profit of Rs 3,752 crore for the quarter ended June — an increase of 137% over the net profit for the corresponding period last year — on the back of higher income and lower growth in operating expenses.      However, a surge in nonperforming assets disappointed investors with the stock closing down 4.3% at Rs 1,888. Acknowledging that earlier expectations of bad loans having peaked turned out to be wrong, SBI chairman Pratip Chaudhuri said that although loans of over Rs 6,700 crore slipped into non-performing assets category this quarter, the bank had seen upgrades of loans worth Rs 1,600 crore. "Of the remaining Rs 5,000-odd crore, Rs 2,000 crore of loans are already on the mend but we could not give shape to them in the quarter," he said.      Chaudhuri added that given the slowdown in the corporate sector, the bank was focusing on home and auto loans to generate credit growth. "We expect inward migration of home loans (from other lenders) to pick up as our new rates are the most competitive," said Chaudhuri. He said that the bank was protecting its spread by eliminating dependence on wholesale funds and reducing its investments in government bonds.      According to Chaudhuri, it was not possible to make medium-term projections on the bad-loans, but in the next quarter the bad loan position was expected to be better.      While a worsening of the economic situation could take its toll on loan quality, Chaudhuri said an improvement in the monsoon and fresh policy measures could improve the situation.      "SBI's numbers disappointed significantly on the NPA front. While we were expecting about a Rs 4,000-crore increase in gross NPAs (which was in any case more than what the management had been guiding for), the bank reported more than a Rs 7,000-crore increase. Similarly, net NPAs too increased substantially more than expected," said Vaibhav Agrawal, VP (research and banking) at Angel Broking. According to Agrawal, the numbers are overall reflective of the weak macro-economic trends and for the next couple of quarters at least, asset quality concerns are likely to continue.      Although some research reports have raised concern over weak monsoons resulting in higher farm loan NPAs of SBI, Chaudhuri said that there was no direct co-relation between monsoon and quality of SBI's farm loan portfolio. "The monsoon situation and our agri book are not directly co-related. Of our Rs 84,000-crore agri loans, nearly Rs 25,000 crore is secured by gold loans. The average NPAs of 8% get magnified only because farmers have not reviewed their agricultural cash credit limits," he added.