MUMBAI: The country’s largest bank, the State Bank of India, shocked the street when it reported a massive quarterly loss due to sharp loan divergences and tighter bond yields that led to treasury losses.
The PSU lender recorded a net loss of Rs. 2,416 crore at the end of the quarter of December 2017 against a gain of Rs. 2,610 crore during the same period last year. 16 analysts surveyed by Bloomberg had estimated net profits in the December quarter at Rs 2,059.4 crore.
“Due to the tightening of bond yields, the bank had to provide Rs 3.4 billion rupiah as a mark-to-market, the treasury income was also affected as there was not a large sale of investments, we also had to do a greater loss of loans and Rs 700 crore wage related provisions, “said Rajnish Kumar, president of SBI, while speaking to the media after the quarterly release of results.
“This has been a challenging year for the bank, but all the clouds have a positive side, and in 2019, we estimate that we can contain new deviations and credit costs by 2 percent.”
The bank also said that the RBI has indicated certain divergences in the classification and provision of assets of the bank as of March 31, after the annual exercise of Risk Based Supervision (RBS) performed for fiscal year 2017.
According to the audit, the regulator detected a divergence in asset classification of Rs 23239 crore at the end of fiscal year 2017. This led the bank to make a provision of Rs 5720.6 crore against these accounts. The divergence of bad loans led the bank to report new deviations of Rs 25836 crores. SBI management said that almost 90 percent of the new deviations came from the watch list, which is now 10,341 crore.
“SBI has published a very weak set of results, the deviations are much higher than expected and even the level of divergence is on a higher side,” said Siddharth Purohit, research analyst at SMC Institutional Equities. “But a lot of the detours have been on the watch list, so the watch list should be reduced now.”
The provisions and contingencies figures increased to Rs 18,876.21 crore (crore) for the quarter under review compared to Rs 8,942.83 crore in the same period of the previous year. Bad loans as a percentage of total loans stood at 10.35 percent at the end of the December quarter, compared with 7.23 percent during the same period of the previous year and 9.83 percent in the previous quarter.
“We are at the end of the cycle of stressed assets that we have had enough in the last two years, but next year it looks very good to us,” Kumar said. “I do not want to sound very optimistic in Q4FY18, but I’m not pessimistic either, today, in February, in 45 days, there will be no miracle, but we can expect a better performance next fiscal year.”
The bank also recorded a lukewarm advance of 2.52 percent gains. While the corporate book continued to record losses, retail advances grew to a strong 13.59 percent.