India’s Largest Bank, the State Bank of India reported Q4FY11 PAT of Rs 209mn, 99% below consensus, primarily on lower NII, higher costs and provisions.
SBI has hiked lending rates by 100 bps (50 bps higher than other banks a catch-up rather than a proactive measure) in 1QFY2012 to offset some of the pressure in margins witnessed. The bank has now fully provided for pension liability of Rs117bn on account of wage hike Rs79 bn through reserves and Rs24.7 bn through profit and loss account during the year.
Loan loss provisions came in Rs39bn, up 72% yoy at 2.1% of advances while SBI also booked investment depreciation of Rs3bn in 4Q. Gross NPL grew 8% qoq to 3.28% of loans while net NPLs grew 6% qoq to 1.63% of loans. SBI now needs to make some more provisions for NPLs in the quarters ahead to meet RBI 70% requirement.