The first reaction to State Bank of India’s dismal January-March numbers was that the new chairman had “cleaned up” the bank’s books by adopting a conservative provisioning approach. However, a closer look at the performance reveals that the bank faces more challenges in coming quarters such as rising bad loans and sluggish interest income growth and is likely to underperform peers, say analysts.
- Brent Lewin/Bloomberg News
- SBI stunned investors when it announced a whopping 99% fall in January-March net profit.
Tuesday afternoon, SBI, India's largest bank by assets, stunned investors when it announced a whopping 99% fall in January-March net profit from a year ago to 208.8 million rupees ($4.7 million). The news sent the stock diving almost 8% to its lowest close in more than 10 months.
In midday trade Wednesday, SBI had extended losses and was down 1.8% at 2,370 rupees ($53.3), underperforming the Sensex’s 0.1% decline.
The main culprit for the poor showing was a spike in provisions including those for loan losses, standard assets and taxes, which jumped more than 80% from a year earlier to 60.59 billion rupees. Part of the reason is that SBI is the only large bank not to have achieved a mandatory 70% provisions-to-bad-loans ratio.
But what has analysts more worried is the bank's core operating performance. The bank̵ [...]
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