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India’s largest lender by assets, the State Bank of India (SBI), just got hammered by bad loans.
The state-owned bank’s profit for the third quarter of the 2016 fiscal (October-December) fell 62% compared to a year ago, according to its earnings report (pdf) released on Feb. 11.
Non-performing assets (NPAs) are the main culprit.
The NPA provisions for the quarter shot up 59% compared to a year ago, while the gross NPA ratio inched upwards to 5.1% from 4.15% in the previous quarter. The NPA ratio is an indicator of the bank’s overall health—a higher ratio means more bad loans. Banks make provisions—set funds aside—typically to cover for default risks.
According to the Reserve Bank of India (RBI), an NPA is a loan where interest or principal has not been paid for more than 90 days.
SBI’s earnings are further evidence of bad loans plaguing the banking sector in Asia’s third-largest economy. The bank made a profit of Rs1,115.34 crore in the quarter, compared to Rs2,910.06 crore in the same period of the last fiscal. Analysts surveyed by Bloomberg had estimated a Rs3,300 crore net profit.
SBI’s stock fell as much as 1.57% on the BSE, after the results were announced.
Everyone, from analysts to RBI governor Raghuram Rajan, has warned of these toxic bad loans. Public sector banks (PSBs) held gross NPAs worth almost Rs3 lakh crore ($44 billion) as of June 2015—89% of the total NPAs in the entire banking system.
Quarterly profits at India’s biggest bank have fallen by a jaw-dropping 62% - Quartz
The state-owned bank’s profit for the third quarter of the 2016 fiscal (October-December) fell 62% compared to a year ago, according to its earnings report (pdf) released on Feb. 11.
Non-performing assets (NPAs) are the main culprit.
The NPA provisions for the quarter shot up 59% compared to a year ago, while the gross NPA ratio inched upwards to 5.1% from 4.15% in the previous quarter. The NPA ratio is an indicator of the bank’s overall health—a higher ratio means more bad loans. Banks make provisions—set funds aside—typically to cover for default risks.
According to the Reserve Bank of India (RBI), an NPA is a loan where interest or principal has not been paid for more than 90 days.
SBI’s earnings are further evidence of bad loans plaguing the banking sector in Asia’s third-largest economy. The bank made a profit of Rs1,115.34 crore in the quarter, compared to Rs2,910.06 crore in the same period of the last fiscal. Analysts surveyed by Bloomberg had estimated a Rs3,300 crore net profit.
SBI’s stock fell as much as 1.57% on the BSE, after the results were announced.
Everyone, from analysts to RBI governor Raghuram Rajan, has warned of these toxic bad loans. Public sector banks (PSBs) held gross NPAs worth almost Rs3 lakh crore ($44 billion) as of June 2015—89% of the total NPAs in the entire banking system.
Quarterly profits at India’s biggest bank have fallen by a jaw-dropping 62% - Quartz
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