India\u2019s largest lender State Bank of India\u2019s (SBI) June quarter profit missed analysts\u2019 estimates and dropped 13.6% from the year-ago quarter. The stock dropped to its 52-week low after the earnings announcements and at 1.45pm was trading 2.5% down.
\nMore than the drop in net profit, what is worrying is the rise in the bank\u2019s bad assets. The quantum of gross bad assets rose to Rs.60,891 crore from Rs.47,156 crore a year ago. In the last quarter alone, the bad assets grew by Rs.9,700 crore. In percentage term, SBI\u2019s gross non-performing assets (NPAs) is now 5.56%, the highest in the past 32 quarters.
\nAfter setting aside money or providing for it, SBI\u2019s net NPAs are now Rs.29,990 crore, or 2,83% of total advances, its worst in the past 35 quarters. In absolute terms, net NPAs have grown by Rs.9,666 crore in the past year and by over Rs.8,000 in the June quarter alone.
\nAs a result of this, the bank\u2019s provision coverage ratio has dropped from 66% to 60.60%.
\nChairman Pratip Chaudhuri, who will hang up his boots in September, had little choice before him. Had he wanted to show lesser net NPAs, he would have needed to set aside more money and that would have brought down the bank\u2019s net profit, something an outgoing bank chairman can\u2019t afford.
\nWith no sign of India\u2019s macroeconomic woes easing, SBI is unlikely to lift its performance in the coming quarters. Being the nation\u2019s largest bank and roughly accounting for one-fifth of the country\u2019s banking industry, it\u2019s a proxy for economy.
\nWith more restructured loans turning bad, SBI is sure to have tough time ahead unless its management takes a hard look at the quality of assets and starts managing them proactively.<\/p>\n","protected":false},"excerpt":{"rendered":"
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