SBI earnings fall 20.4% in Q1, bank expects recovery numbers to improve

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Mumbai: State Bank of India's first-quarter profit fell short of expectations as the nation's top lender by assets saw a spike in bad loans after merging five subsidiary banks with itself, sending its shares more than 5 percent lower.

SBI reported a consolidated net profit of Rs2,005.53 crore for the April-June 2017-18 quarter against a consolidated net profit of Rs2,520.96 crore for the year-ago quarter. Following the merger, the total customer base of SBI increased to 37 crore with a branch network of around 24,000 and almost 59,000 ATMs across the country. Pre-merger, the bank's year-earlier profit was Rs 25.21 billion.

State Bank of India (SBI), which merged five of its associate banks from the fiscal year beginning, said June quarter earnings fell 20 per cent on a non-comparable basis, but rose more than four times if the numbers of merged entities were taken into account.

The bank's consolidated net profit, including that of its asset management and insurance arms, grew nearly three times to Rs3,032 crore from Rs1,046 crore a year ago.

SBI said the remaining NPA (Rs. 17,880 crore), came from the retail book. The bank's loan portfolio shrank Rs65,000 crore to Rs18,50,000 crore. Provisions for bad loans declined 26 per cent to Rs9,869 crore and gross bad loans rose to 9.9 per cent at Rs1,88,000 crore. SBI expected these bad loans, which are under its national banking portfolio, would see a "pull back" to the standard category.

But its overall financials continued to deteriorate as it grappled with the integration of the disparate entities that it brought into its fold in the biggest ever consolidation exercise in the industry.

SBI says it did not gain from the merger as its loan books did not grow proportionately during the first quarter of the merger.

Indian banks' sour assets have surged in the past year or so after a regulatory crackdown to clean up the sector dominated by state-run lenders. "This one quarter we have only spent to getting our house in order whether it be data merger, people transfers, reorganisation of the branches, so all of that has happened".

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