The State Bank of India reported its first quarterly loss in nearly two decades, after a surge in provisioning for bad loans and losses on bond valuation. Bad loans rose after the RBI directed the bank to classify loans worth £2.30 billion, largely in the power sector, as non-performing assets. The rise in bond yields resulted in major loss for the bank, with the value of bonds dipped by £ 200 million, requiring provisioning, and profits from trading in securities dipped to £102.6 million from £490 million in Q3FY17. SBI chairman Rajnish Kumar said, “We have done an account-by-account assessment and NPA provisions have peaked and will be coming down in coming quarters.”
Kumar said that the large loan accounts against which the bank has initiated insolvency proceedings have advances amounting to £7.80 billion. The bank has already made all the statutory provisioning in respect of these loans and most of these were expected to get resolved in the first quarter of FY19. Country's largest bank, SBI reported a net loss of £241.6 million for the quarter ended December 31, versus a profit of £182 million a year earlier. The quarter turned out to be the perfect storm for the bank as it was simultaneously hit by £70 million provisions towards imminent wage revisions and costs related to merger of associate banks with itself.
Kumar said the bank has invoked the personal guarantee of the promoters, in addition to initiating insolvency proceedings against them. He said that 90 per cent of the accounts that slipped into the NPA category were from those classified as stressed and there were no stressed loans left. “We are at the end of the NPA cycle and the overall scenario looks very good,” he said. He also talked about the shift in customer engagement to alternate channels, which now account for 84 per cent of all transactions, up from 76 per cent earlier. “The benefits of the branch rationalisation that we have undergone will be felt in coming quarter,” Kumar said.
The CEO said that the bank will also announce its new minimum balance requirement by the end of the month or early March. He said the bank is conducting an annual review of charges and was re-looking at the minimum balance requirements as part of the review.
