Worst is over, eyeing NIM at 3.80%: SBI Boss/ SBI: Expect NPAs to improve; restructuring not red flag

Worst is over, eyeing NIM at 3.80%: SBI Boss

Published on Mon, Feb 13, 2012 at 19:11 | Source : Moneycontrol.com

Updated at Tue, Feb 14, 2012 at 12:59

"Our source of strength has largely come from the net interest margin. Globally people are willing to pay higher price for loans (dollar denominated) due to the ongoing crisis. Moreover, we have dropped all high cost of deposits. Our net profit (for Q3) is without any windfall gain," said SBI boss.

Moneycontrol Bureau

"The worst is over," Pratip Chaudhuri, chairman, the State Bank of India (SBI) said while announcing the third quarter (Oct-Dec) results here in Mumbai.

"The bank's strength has largely come from the net interest margin. Globally people are willing to pay higher price for loans (dollar denominated) due to the ongoing crisis. Moreover, we have dropped all high cost of deposits. Our net profit (for Q3) is without any windfall gain."

With some big accounts turning into non-performing assets (NPAs), the banking behemoth was facing the risk of deteriorating asset quality concern. Even in Q3, the gross NPA ratio upped from 4.19% to 4.61% quarter-on-quarter. The net NPA ratio stood at 2.22% as against 2.04% in Q2. During the quarter, it has restructured assets at around Rs 2,000 crore out of the fresh NPAs of Rs 6,000 crore.

SBI: Expect NPAs to improve; restructuring not red flag

According to the SBI chairman, a big corporate client (read Kingfisher Airlines) from aviation industry accounted for Rs 1,200 crore in the restructuring scheme. Restructuring means that the bank revises the original terms of the loan, and could be willing to either accept deferred interest payments, or a lower rate of interest, so that the loan doesn't go bad.

SBI shares on Monday however fell more than 2% to close the day at Rs 2,129 on the NSE on asset quality concern.

"In the next quarter, there will be no big surprise on asset quality. Another aviation company (Air India) has served its interest payments till January. Till date, it is a performing standard asset," said Chaudhuri adding that even if it stops repaying in the worst scenario, the account will turn NPA after 90 days only. The bank has a credit exposure of around Rs 1,300 crore to Air India.

Meanwhile, the lender is confident of achieving a credit growth target of 16% in FY12. Its loan book expanded more than 17% YoY to Rs 8.69 lakh crore while the incremental credit growth (between April and December, 2011) has been at 12.64%. The Reserve Bank of India has projected 16% YoY loan growth for the industry in FY12.

"We are contemplating to cut interest rates for our educational loans. In the next asset liability committee (ALCO) meeting, we will take the decision. We see good growth for our agricultural loans. We expect to register a net interest margin of around 3.80% in 2011-12," said the SBI boss.

Under its Medium Term Notes (MTN) programme, the bank is mulling to bring a fresh issue to raise funds. Although the lender has not yet decided on the amount, it is likely to be above USD one billion.

An MTN programme allows an issuer to mop up funds from the overseas market on an ongoing basis through various products such as floating rate notes or on a fixed rate after getting regulatory approvals. The bank primarily uses the proceeds to expand its international operations.