SBI stock rises to three-month high on positive bad loans commentary in Q4 earnings announcement

The SBI stock rose in Wednesday's trade after the state-owned lender posted its biggest ever quarterly loss at Rs 7,718.17 crore and said it has a recognized major portion of its bad loans during the quarter ending March 2018. At 9:24 am, the stock was trading 3.09% or 7.85 points higher at 262 level on the BSE. The stock rose 5 percent intra day to hit a high of 266.85 its highest level since March 1. The stock closed 3.56% or 9.05 points higher at 263.20 level on BSE. Brokerages have become positive on the stock after commentary on bad loans.

While the gross NPAs went up marginally from 10.35% to 10.90%, the net NPAs were almost flat at 5.73% in the fourth quarter. Fresh slippages (representing new loans turning bad) was at Rs 33,670 crore in the fourth quarter while fresh provisioning was sharply higher at Rs 28,096 crore. This is despite the fact that RBI had permitted banks to provide only 40% for companies under NCLT, as against the original stipulation of 50% provision. The good news from SBI is that it has provided Rs 6,000 crore in the last 2 quarters for bond losses as a result of rising bond yields. The losses are fully provided for despite RBI giving banks 4 quarters to write off the bond losses.

Markets appeared to be impressed by the SBI results for two reasons. Firstly, there is the first indication that the NPA cycle may be turning around and combined with growth in advances, this could result in improved profitability in the coming quarters. Secondly, the NCLT resolution will result in a write-back of close to Rs 1 trillion for Indian banks and SBI is likely to be the biggest beneficiary."

The stock closed 3.69% or 9.05 points higher at Rs 254.15 Tuesday after the Q4 earnings of the lender were announced. The share opened at 245.10 and surged as much as 6.03% intra day on Tuesday, its highest in over a month after FY19 slippages were seen at 2% or Rs 45,000 crore for a balance sheet size of Rs 20 lakh crore compared to Rs 150,000 crore slippages in FY 18, according to an analysis done by a business news channel.

On Tuesday, the bank reported a net loss of Rs 7,718 crore in Q4 of last fiscal. In comparison, in its December quarter, when it had reported its first quarterly loss in 17 years, the net loss stood at Rs 2,416 crore. And the bank had reported a net profit of over Rs 2,814 crore in Q4FY17. In fact, SBI's latest loss is the highest quarterly loss figure reported by any bank after Punjab National Bank's Rs 13,417-crore loss. The loss came largely from the huge jump in provisions for non-performing assets (NPAs) under the Reserve Bank of India's revised framework for resolving stressed assets. Total provisions went up 66.55 per cent in the quarter under review to Rs 23,601 crore against Rs 14,171 crore in the previous quarter.