SBI’s RM4b loss signals ‘happy year’

MUMBAIState Bank of India (SBI), the country’s largest lender by assets, joined its private peers in shrugging off losses as investors believe the lenders have finally got a handle on bad loans.

SBI’s shares surged to a sixweek high after it reported a record loss yesterday, weighed down by a doubling in provisions for soured debt. A similar contrarian market reaction was seen after No 2 private lender ICICI Bank Ltd and smaller rival Axis Bank Ltd reported poorer than expected earnings.

“The fact that SBI has booked the losses like Axis Bank is heartening for investors,” Gopal Sharma, head of institutional sales at Inventure Growth & Securities Ltd, said by phone. “Also, generation of bad loans seems to be more or less contained for now.”

Chairman Rajnish Kumar has predicted earnings will start to improve in the year through March 2019, buoyed by loan recoveries under a revamped bankruptcy law. Optimism is high following the biggest asset sale under India’s new insolvency code, which was completed last week.

“Last year was one of despair, this year is of hope and the one ending March 2020 will be one of happiness,” Kumar said at a subsequent briefing. “We have already taken a hit for all asset quality related issues and within next two years gross bad loan ratio will fall below 6%.”

Gross bad loans were 10.91% of total lending in the quarter ended March 31, 2018, rising from 10.35% the previous quarter. SBI swung to a loss of 77.2 billion rupees (RM4.63 billion) in the period from a profit of 28.1 billion rupees a year earlier. That compares to a loss of 17.3 billion rupees predicted by the average of 14 estimates compiled by Bloomberg.

SBI shares rose about 4% to 253.90 rupees in Mumbai yesterday, the highest since April 11 and paring this year’s drop to 18%.

Provisions for bad debt jumped to 241 billion rupees from 109.9 billion rupees a year earlier — Bloomberg