Analysts worry over rising NPA levels of SBI

Mumbai: After getting beaten by a good 4.3 percent on Friday, the stocks of SBI, which reported a whopping 70 percent spurt in bad loans in the June quarter, are set to see more selling pressure on Monday as a number of brokerage houses have called for 'sell' on the counter.

Brokerages like Kotak Securities, Emkay Global and Motilal Oswal Securities have termed the numbers on the bad assets front as disappointing and expressed concerns about the asset quality of the nation's largest lender going forward.

Rising NPAs. Reuters

The SBI posted a 137 per cent rise in its net profit to Rs 3,752 crore in the first quarter ending June on the back of healthy net interest income and treasury gain.

However, concerns regarding rise in bad asset has stayed for the bank as both gross NPA and net NPA numbers jumped during the last quarter.

The bank's net non-performing assets (NPAs) rose to 2.22 percent of total loan book, against 1.61 percent a year ago. Similarly, gross NPA rose to close to 5 percent from 3.5 percent a year earlier.

In value terms, the net NPAs rose to Rs 20,324 crore (2.22 percent of loans) during the June quarter, from Rs 12,435 crore (1.61 percent). Similarly gross NPAs rose to Rs 47,156 crore (4.99 percent) at the end of the first quarter, as against Rs 27,768 crore (3.52 percent) a year ago.

Terming the SBI numbers as 'below expectation' banking analyst at Kotak Securities, Saday Sinha said, "SBI's Q1 net profit of Rs 3,751 crore though is a 137 percent rise from year-ago period, it is slightly below expectation."

He also pointed out that in fact PAT was aided by a Rs 520 crore write-back of investment depreciation and decline in provision coverage ratio.

"Biggest disappointment came on the asset quality from - gross NPA rose by almost Rs 7500 cr, indicating gross slippage must be more than that, which is negative in our view," he said.

Brokerage firm, Emkay Global also recommended investors to reduce the stock from its portfolio on the back of rising NPA numbers.

Referring to this, VP-Markets Strategy and Equities of Motilal Oswal Securities, Rikesh Parikh said the bank had reported lower than estimated net interest income (NII).

"Stress on assets can be seen from increase in Gross NPA increasing to 4.99% and net NPA to 2.22%, slippage is clearly more than management guidance of Rs 55 billion is disappointing. Going forward direction on slippages and restructure assets need to be looked into," he said.


Updated Date: Dec 20, 2014 11:11 AM

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