SBI’s asset quality still a worry

After much yo-yoing, the stock of SBI plummeted nearly 4 per cent, post its June quarter results. What initially appeared to be a lower-than-expected slippage number turned out to be a not-so-comforting addition to SBI’s bad loan book. While the bank reported a lower ₹9,984 crore of fresh slippages in the June quarter (as against ₹33,600 crore in the March quarter, due to one-time impact of the RBI’s circular), it disclosed increase in outstanding NPA accounts to the tune of ₹4,300 crore. Hence the total accretion of ₹14,300 crore (fresh slippages plus increase in outstanding NPAs) in the June quarter to bad loans is an elevated number.

The bank’s still large watch-list, increasing non-corporate slippages and possible impact of the RBI’s diktat that requires banks to report even one-day defaults and draw up resolution plans within 180 days — are concerns. Non-corporate slippages in the June quarter were the highest (barring post-merger impact last year) in the last two years.

The bank’s core performance remained weak, with domestic loans growing by a tepid 7 per cent in the June quarter. SBI’s 24 per cent growth in net interest income was thanks to a one-off recovery. Higher NPA provisioning and significant marked-to-market losses on investments in government bonds led the bank to report a loss of ₹4,876 crore in the latest June quarter.

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