The State Bank of India (SBI) is the country’s largest state-run lender. It accounts for more than a fifth of India’s banking assets. The public sector bank which operates globally is the largest domestic lender in terms of assets. With more than 42 crore customers, SBI has 22,000 branches. The bank has stayed on the Global 500 List for the past 13 years. However, SBI has been reporting losses in the last three quarters. One of the main reasons for recording the third consecutive loss this quarter was due to lack of provisions. Let’s take a look at SBI’ financial performance in recent times.
Recent Financial Performances of SBI
Q1 FY 2018-19
SBI incurred a net loss of Rs. 4,876 crore in the quarter. The bank was not able to avail the Reserve Bank of India (RBI) dispensation with regard to the amortization of MTM (market-to-market) loss. The net loss in this quarter was attributed to a higher provision on account of wage revision and enhancement in
gratuity ceiling. The operating income recorded an increase of 11.19% and stood at Rs.28,478 crore. SBI’s operating profit recorded a marginal increase of 0.83% and stood at Rs.11,973 crore in the quarter. However, the bank’s net interest income registered a growth by 23.81% and stood at Rs.21,798 crore, as compared to Rs.17,606 crore in Q1FY18.
SBI’s gross NPA (non performing assets) declined from Rs.2,23,427 crore on March 2018 to Rs.2,12,840 crore as on June 2018. In value terms, they increased to Rs 2,12,840 crore, from Rs 1,88,068 crore. The gross NPAs rose to 10.69% of the total advances, as against 9.97% during the same period in the previous year. Meanwhile, net NPA declined from Rs.1,10,855 crore to Rs.99,236 crore during the same period. The bank’s net interest income for the quarter stood at Rs.21,798 crore, as compared to Rs.17,606 crore in the same period in the previous year.
In the Q4 FY 2017-18, SBI incurred a net loss of Rs.7,718 crore. The operating profit for the full FY 2017-18 increased marginally by 0.08% and stood at Rs.59,511 crore. For FY 2018, the bank incurred a net loss of Rs.6,547 crore. The loss was attributed to an increase in provisions for NPAs and Mark to Market on investment portfolio. In Q4, SBI’s gross NPAs declined to 6.90% of the gross advances. As compared to 6.50% in Q4 2016-17. The net NPAs reported a decline of 3.71% from 4.24% in December quarter.
Stock Price Trends for SBI in 2018
In the early August, SBI hit a six-month high on BSR and stood at Rs.307. The SBI stock has been trading at its highest level since February 2018. At the beginning of September, the scrip stood at Rs.318. As on 18 September 2018, the price of the stock stood at Rs.275 while the market capitalisation of the bank was at Rs.2,44,175 crore.
In a bid to raise capital, SBI proposed to sell 3.89% stake in the National Stock Exchange of India Ltd (NSE) at the beginning of August. The lender is eyeing loans at an annual average of 12% by March 2020. It is also aiming to cut down its gross non-performing loan ratio by half. Finally, in order to improve its quarterly result, SBI is also looking forward to bringing down provisioning costs and improve margins. In September, the bank announced that it will sell 8 non-performing assets to recover dues worth over Rs.3,900 crore. At the same time, SBI has invited bids from asset reconstruction companies (ARCs) and financial institutions (FI).
At the end of the day, SBI stock is still one of the top preferred public sector stocks due to its strong CASA franchise. The bank also consists of better asset quality and capitalisation. At present, SBI has a huge amount of bad loans and, is therefore working towards having an aggressive approach to resolve them by making recoveries through various modes. The bank has devised a number of strategies to bring down the state of non-performing assets. At the same time, SBI has other areas from which it can yield large benefits like the life insurance segment. Considering all the facts presented thus far, as far as performance is concerned, SBI is poised to perform really well in the coming days. Investing in the stock for long-term could be a good move. However, it is heavily advised to conduct your own research and visit various websites. You can also check out BankBazaar.com for learning about SBI stocks and getting a detailed analysis of its trends.
The contents of this post/blog does not constitute financial or other professional advice nor does it imply in any manner a principal-agent relationship, and is not a professional advice on a specific financial matter.