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SBI Q1 strong, but how good is bank in recovering bad loans?

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SBI's June quarter earnings showed that the bank managed to contain the stress in its loan book better than what most analysts had estimated.

SBI Q1 strong, but how good is bank in recovering bad loans?
The market has cheered State Bank of India’s first-quarter earnings, with the bank managing to contain the stress in its loan book better than what most analysts had estimated. But how good has the bank been when it came to recovering its non-performing assets.
Let us take a look.
From FY17 to Q1FY22, SBI has seen incremental slippages of Rs 3,78,802 crore vs incremental loan growth of Rs 4,47,799 crore. Slippages here mean good loans going bad.
In short, cumulative slippages in that period were roughly 85 percent of the bank’s incremental loan growth! This is much lower for other banks like ICICI Bank at 42.2 percent and Axis Bank at 46.5 percent.
Loans (Rs in cr)GrowthQ1FY22FY17
SBI  447,799.00  2,523,793.00  2,075,994.00
ICICI Bank  274,365.78     738,597.86     464,232.08
Axis Bank  241,804.69     614,873.69     373,069.00
 
Slippages  (Rs in cr)FY17 to Q1FY22 (Cumulative)
SBI  378,802.00
ICICI Bank  115,788.00
Axis Bank  112,518.00
 
SBI has been very aggressive in writing off its non-performing assets. They have written off NPAs worth more than Rs 2.1 lakh crore from FY17 to the quarter gone by.
Write offsFY17 to Q1FY22 (Cumulative)
SBI  210,809.09
ICICI Bank    58,869.13
Axis Bank    50,376.00
 
The bank’s weak underwriting skills are also evident from write-offs as the percentage of slippages being the highest for them and their recovery rate as well as upgrades (bad loans becoming standard assets) being the lowest as a percentage of incremental slippages.
 
Write off as % of Incremental SlippagesFY17 to Q1FY22
SBI           55.65
ICICI Bank           50.84
Axis Bank           44.77
Recovery & UpgradesRs cr% of Incremental Slippages
SBI  104,915.00              27.70
ICICI Bank    35,587.00              30.73
Axis Bank    42,155.00              37.47
GNPA ratio has improved by 158 bps for SBI from FY17 to Q1FY22.
The same has improved by 274 bps for ICICI Bank and 119 bps for Axis Bank.
GNPA Ratio, %Q1FY22FY17
SBI             5.32                6.90
ICICI Bank             5.15                7.89
Axis Bank             3.85                5.04
The good part of their stressed assets in the balance sheet has been the decline in the quantum of loans on the watchlist!
The watchlist has declined by Rs 21,124 crore for SBI, while it has declined by Rs 963 crore for ICICI Bank and increased by Rs 1,869 crore for Axis Bank.
Watchlist, %Q1FY22FY17
SBI    11,303.00       32,427.00
ICICI Bank    18,076.00       19,039.00
Axis Bank    13,101.00       11,232.00
 
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