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ET EDIT -State Bank of India Mirrors State of India

August 16, 2018 06:41 AM


State Bank of India Mirrors State of India
State Bank of India (SBI) has reported a loss of ₹4,875 crore for the April-June quarter (Q1) for 2018-19. Analysts are disappointed: the consensus was an expected profit of ₹238 crore. This is the third successive quarter of losses for the bank. Worryingly, SBI has started bleeding from multiple sores, not just from bad loans to big companies. Trading income has fallen, a sign of the drag in the economy; harder bond yields, marked to market, have dented income. Loans have shrunk 3% quarter on quarter, unexpectedly. Textiles, where one single borrower is in the red for ₹2,000 crore, and power, where the bank’s exposure is ₹17,000 crore, are still sputtering — the latter is resisting banks’ attempts to enforce new bankruptcy proceedings to recover debt.

The arc of bad loans has expanded to retail, small and medium enterprises (SMEs) and farming, sectors for which SBI is the single-largest formal lender. Farm loan waivers, administered by state governments, were not expected to dent bank portfolios. But SBI, with its pan-India operations and hinterland reach, cannot be immune. The SBI management’s initial ₹50,000-crore bad-debt forecast was based on the expected performance of big corporate loans, but farm loan waivers have begun to bite as state governments delay their payment to the banks. SME loans will also cause pain, though the bank is ignoring the threat now.

SBI has not been idle: it has increased provisioning from ₹8,929 crore in Q1 last year to ₹19,228 crore now. Gross non-performing loans have fallen marginally from 10.9% of total lending in Q4 2017-18 to 10.7%. Net interest income, the core of its business, has gone up 24% in a year. Now, India’s largest lender awaits effective reform in the power sector to rescue stranded assets, besides sustained economic growth, to get out of its rut

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