SBI Q2 profit slides 35% in worst quarterly fall in 2 yrs

Mumbai: State Bank of India reported a 35% drop in net profit for the quarter ended September 2013 — the sharpest fall in earnings in two years — with the bank's new chairman Arundhati Bhattacharya warning that the worst was not over.

    The bank's net profit for the quarter fell to Rs 2,375 crore from Rs 3,658 crore in the same period last year. 
    The bank's chairman said that its earlier proposal to merge associate banks with itself has been put on the back burner with the focus shifting to consolidation. This year the bank plans to raise Rs 8,000 crore through a qualified institutional placement (QIP) in addition to the Rs 2,000-crore capital that the bank has soughtfrom the government. 
    "Provisions for loan losses, provision for the staff wage hikes, provision for pensions and of course the investment depreciation were the reasons for the dip in the net profit in the quarter," Bhattacharya, the newly-appointed SBI chairman and managing director, said. 
    The bank's share price rose by Rs 22 to close at Rs 1,698 at the BSE. 
    Although the bank has seen an increase in bad loans, the rate at which loans have turned bad has slowed. The good news is on the individual loan front, such as mortgages, where demand is good and bad loans have come down. SBI's home loan portfolio has grown 20% to Rs 1,30,034 crore from Rs 1,08,381 crore last year. 
    According to Bhattacharya, the bank was tackling the challenges by focusing on preventing loans from going bad and working on upgradation of non-performing assets. "We have added 17,000 staff and 1,500 officers last year who have now been trained and deployed. We want to leverage our IT platform so that most of the back office functions are taken over by technology and our staff is free for marketing," she said. 
    Saday Sinha of Kotak Securities said, "The bank's net interest income has come ahead of expectations on the back of better than expected net interest margin along with 19% loan growth. However, profit after tax came a shade below our expectations due to higher than expected operating expenditure and NPA provisions." 
    Ritesh Parikh, VP, Motilal Oswal Securities, said, "SBI's reported profit was in line with our estimate, improvement in NIM was a positive surprise while lower slippages compared to previous quarter and provisions were in line with estimate."

FUTURE SHOCK: SBI chairman Arundhati Bhattacharya has warned the worst is not over yet