The worst might be over for State Bank of India, the country’s largest lender, on asset quality issues.
According to broking firm Goldman Sachs,
which had a meeting with divisional heads of SBI in the first week of
this month, the slippages are likely to stabilise or fall. And, net
non-performing assets might actually fall by the end of March to 2–2.5
per cent as compared to 2.4 per cent in September-end
Growth, however, is likely to emerge as an issue for the lender in the next financial year, SBI indicated to the analysts. “The management indicated that NPLs (non-performing loans) are near a peak but growth will be a bigger challenge in FY14,” Goldman said in a note. The brokerage maintained a neutral rating for SBI.
Improving asset quality might also prompt the lender to increase its provision cover and also prepare for a pay rise.
“While NPL may remain elevated in the near term, we think a decline would be positive for SBI, as it would reduce stress on the balance sheet, which in turn would lead to an improvement in profitability,” it said.
On growth, demand for large corporate loans are still not there and the lender is not focusing on the mid-corporate segment. Growth is expected to come from home and automobile loans. Mortgages will be a key driver in the current financial year, with 25-30 per cent growth expected. SBI has seen home loan approvals increasing to Rs 150 crore a day from Rs 65 crore about two months earlier. The number of applications it received doubled in the past couple of months.
Automobile loans, which grew 28 per cent in the first half of the financial year, is expected to continue the momentum.
Growth in retail assets comes on the back of lower lending rates, improved processes and switchover of customers from other banks to SBI. “The bank has reduced its loan processing time to two to three days for projects already approved, as this requires only KYC (know your customer) checks. In contrast, the bank requires around 10 days processing time when both project and KYC checks require approval. Previously, processing took as long as 20-3
Growth, however, is likely to emerge as an issue for the lender in the next financial year, SBI indicated to the analysts. “The management indicated that NPLs (non-performing loans) are near a peak but growth will be a bigger challenge in FY14,” Goldman said in a note. The brokerage maintained a neutral rating for SBI.
Improving asset quality might also prompt the lender to increase its provision cover and also prepare for a pay rise.
“While NPL may remain elevated in the near term, we think a decline would be positive for SBI, as it would reduce stress on the balance sheet, which in turn would lead to an improvement in profitability,” it said.
On growth, demand for large corporate loans are still not there and the lender is not focusing on the mid-corporate segment. Growth is expected to come from home and automobile loans. Mortgages will be a key driver in the current financial year, with 25-30 per cent growth expected. SBI has seen home loan approvals increasing to Rs 150 crore a day from Rs 65 crore about two months earlier. The number of applications it received doubled in the past couple of months.
Automobile loans, which grew 28 per cent in the first half of the financial year, is expected to continue the momentum.
Growth in retail assets comes on the back of lower lending rates, improved processes and switchover of customers from other banks to SBI. “The bank has reduced its loan processing time to two to three days for projects already approved, as this requires only KYC (know your customer) checks. In contrast, the bank requires around 10 days processing time when both project and KYC checks require approval. Previously, processing took as long as 20-3
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