Mumbai: State Bank of India (SBI), the country’s largest lender by assets, posted the sharpest fall in profits since 2011 as a central-bank audit triggered a surge in provisions for bad loans.
Net income fell 66 per cent to Rs12.6 billion rupees ($188 million), or Rs1.64 a share, for the three months ended on March 31. That’s down from Rs37.4 billion, or Rs5, a year earlier, the Mumbai-based lender said in a Friday exchange filing. Profit missed the Rs18.3 billion mean of analyst estimates compiled by Bloomberg.
Chairman Arundhati Bhattacharya, who is mulling the acquisition of some of the bank’s subsidiaries, is trying to bolster profits at a time when the outlook for bad loans is looking increasingly uncertain. While analysts had been anticipating the central-bank audit to provide clarity on banks’ balance sheets, that optimism has been clouded by the $3.1 billion of losses SBI’s state-run peers have since reported for the quarter.
“Pressure on asset quality and profits will continue for most state-run banks” until next year, Siddharth Purohit, an analyst at Angel Broking in Mumbai, said before the earnings were released. “This is going to be a year of consolidation, rather than aggressive growth, for SBI.”
Shares of the lender rose 0.3 per cent to Rs184.65 at 1:36pm in Mumbai trading, paring this year’s losses to 18 per cent. The S&P BSE India Bankex Index, which tracks 10 lenders, rose 2.5 per cent this year.
SBI’s gross bad-loan ratio widened to 6.5 per cent from 5.1 per cent in the previous quarter. Provisions for bad loans jumped 58 per cent from December to Rs121 billion by March, the filing showed.
The proportion of Indian banks’ stressed assets, which include restructured and soured loans, to total advances surged to a 14-year high of 11.3 per cent as of September 30, data compiled by RBI show. In December, Reserve Bank of India Governor Raghuram Rajan set lenders a March 2017 deadline to clean up their balance sheets. — Bloomberg News