Mumbai: The country’s largest lender, State Bank of India (SBI), chose to take a huge knock on its profits in exchange for a less turbulent future on asset quality.
The lender reported a net profit of ₹838.40 crore for the March quarter, way below the median estimate of ₹4840.84 crore according to a Bloomberg survey of analysts. That is because the bank set aside 24% more provision against stressed loans than it did in the previous quarter.
It beefed up the provisioning coverage ratio to 79% from 66% a year ago. SBI chairman Rajnish Kumar said that accounts such as Essar Steel, Alok Industries and Bhushan Steel have been provided fully and will get the bank decent recoveries. “We have about ₹16,000 crore recoveries in our pocket,” Kumar said, but he preferred not to provide a timeframe. These accounts are at various stages of resolution under insolvency proceedings.
Indeed, the bank has been increasing provisions every quarter and preferred to provide 90% on all accounts that are under insolvency proceedings. In short, the bank has left nothing to chance in the future. The move is understandable given that in the past, SBI had suffered unpleasant surprises on asset quality with chunky additions. The bank’s slippages had surged in every quarter in FY18, pushing it into a loss for the year.