New Delhi: Post the merger with its five associates and Bharatiya Mahila Bank, State Bank of India reported a five-fold jump of 436 percent in net profit at Rs 2,006 crore as a merged entity for the first quarter of FY18 helped by fall in provisions.

A year ago, profits of SBI, which is now among the top 50 global banks, as a combined entity stood at Rs 374 crore.

However, the merger impact was felt on its asset quality which deteriorated to Rs 188,066 crore (9.97 percent of total loans) as on June 2017 from Rs 137,662 crore (7.40 percent) in June 2016.

The bank witnessed a larger slippage into bad loans from standard assets from the retail — small and medium enterprises (35 percent), agriculture (40 percent) and housing (14 percent) portfolio.
Of the total slippages during the quarter at Rs 26,249 crore, Rs 8,053 crore was from the corporate portfolio, while the remaining Rs 17,880 crore came largely from the retail book.

“As a result of the merger process, the follow-up required on the retail side was missing, and this was expected because a lot of data and mapping wasn’t available. Hence, the slippages numbers were compounded. Further, the RBI’s waiver period of two months during the demonetisation has fallen off and has had a hit of about Rs 1,800 crore. And the other aspect was in respect of the agri portfolio in the states in anticipation of waivers,” said Arundhati Bhattacharya, Chairman of SBI, country’s largest lender.

The bank further expects a slippage of Rs 30,000 crore but “we expect to pull back a sufficient amount and net increase in this area would be around Rs 7,500 crore and in the corporate book our guidance is around Rs 24,000 crore,” Bhattacharya added.

Therefore, SBI’s slippage ratio which was at a high of 5.78 percent, is expected to come down to 3.3 percent in FY18 with the decline in NPAs from the retail and agriculture books.

Additionally, the bank will make provisions worth Rs 8,571 crore towards the 12 accounts admitted to the National Company Law Tribunal (NCLT) over the next three quarters.

On net interest income (NII), SBI witnessed a marginal dip of 3.5 percent year-on-year to Rs 17,606 crore from Rs 18,246 crore.

Non-interest income also decreased by 8.6 percent from Rs 8,761 crore in Q1FY17 to Rs 8,006 crore in Q1FY18 due to a one-time profit on sale of investment made last year.

The bank completed the data merger process, merger of administrative offices, reallocated branches to different regions, migrated accounts to the new process, re-mapping and shifting of accounts to different controllers, movement of the staff and rationalisation during the April to June quarter.

SBI already merged its 122 administrative offices and 524 branches and expects to complete the entire exercise of rationalisation with an expected savings of Rs 1160 crore from this by September.

In the year ahead, SBI will deploy 8600 people in the sales team.

Bhattacharya concluded her statement by saying, “We have been saying that the physics of the merger is over and the chemistry has just started…We have worked hard for the past 3 months and obviously it (merger) will have its impact and we will work towards it for the next two quarters.”