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State Bank of India Q3 Profit Slumps 62% on Higher Bad Loans

11 February, 2016 8:02 AM
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State Bank of India Q3 Profit Slumps 62% on Higher Bad Loans

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State Bank of India (SBI) on Thursday reported a 62 per cent slump in its net profit because of higher bad loans in the December quarter. India's biggest lender by assets posted a net profit of Rs 1,115 crore against estimates of Rs 3,300 crore in Q3.

SBI's profitability was hit because of a 60 per cent rise in provisions for bad loans. SBI set aside Rs 7,645 crore for non-performing loans, which soared 28 per cent sequentially to Rs 72,792 crore in the December quarter.

Analysts said it's a relief that SBI has not reported a loss, unlike many of its state-run peers.

"SBI's numbers look better than other banks because there is not much jump in seems, at an operating level, there is not too much damage at SBI," G Chokkalingam, Founder of Equinomics Research & Advisory.

Over the last few days, PSU lenders such as Allahabad Bank, Central Bank of India, Dena Bank, Indian Overseas Bank and Oriental Bank of Commerce have reported huge losses on account of rising bad loans.

Analysts have attributed the sharp rise in bad loans in Q3 to the Reserve Bank's order asking lenders to treat some stressed borrowers as non-performing even if they have not defaulted yet.

The RBI's directions followed Governor Raghuram Rajan's call for cleanup of bank balance sheets by March 2017. The banks have been asked to make required provisions during the third and fourth quarters of this fiscal year ending in March.


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