SBI posts 80% jump in March quarter net profit to ₹6,451 crore
Premium- State Bank of India (SBI) on Friday reported a record quarterly profit, helped by higher net interest income and lower provisions to cover loan losses
State Bank of India (SBI) on Friday reported a record quarterly profit, helped by higher net interest income and lower provisions to cover loan losses.
Net profit at the country’s largest lender rose 80% from a year ago to ₹6,451 crore in the three months ended 31 March, topping the ₹6,166.2 crore average estimate in a survey of 10 analysts by Bloomberg.
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Net interest income, the difference between interest earned and expended, rose 18.9% year-on-year to ₹27,067 crore. Its domestic net interest margin, a measure of profitability, narrowed by 5 basis points (bps) to 3.26% from the preceding December quarter.One basis point is one-hundredth of a percentage point.
Provisions, or the money set aside to cover losses, fell 11% to ₹13,249 crore in the fiscal fourth quarter as asset quality improved.
While the bank performed better than expected, the coming quarters may show some impact of the second wave of the pandemic. The second wave and the subsequent lockdowns have disrupted economic activity, although less severely than last year.
“The sharp rise in covid-19 cases in recent times and the restricted lockdowns in many places have slightly decelerated the pickup in the economy that we have witnessed in the previous two quarters," said SBI chairman Dinesh Khara.
The bank expects to grow its loan book by 10% in the current fiscal, significantly faster than the 5.67% growth seen in the year ended 31 March.
The optimism stems from the performance of the retail segment, which expanded 16.5% in fiscal 2021.
The lender’s corporate loan book, however, shrank 3% in FY21. If purchases of commercial papers and corporate bonds are included, the bank would have reported a 2.6% growth.
“The movement is not up to the mark because it is a function of demand," Khara said, adding that working capital utilization was about 70% of the sanctioned limit. This, he said, means that large corporates are utilizing even less than the overall average.
“Large corporates have the option of raising funds from the bond market. We are supporting them in their effort to raise funds from the bond market," he added.
India’s largest lender also wants to create a covid loan book of ₹10,000 crore, lending to the sectors covered under the Reserve Bank of India’s recent liquidity measure.
“To Bharat Biotech (the maker of Covaxin), we have given (a credit line); we have given to Biological E (another vaccine developer) and Serum Institute of India (the maker of Covishield) also. We are quite open to any such requirements and will be more than happy to support," Khara said.
The state-run bank saw an improvement of its asset quality in the fourth quarter of FY21 as gross non-performing assets (NPAs) as a percentage of total advances stood at 4.98%, down 117 bps from a year earlier. The gross bad loan ratio is at the lowest level in five years, signalling a gradual improvement in asset quality. It also contained slippages and debt recasts much below the forecast of ₹60,000 crore in FY21. The aggregate of slippages or incremental bad loans and debt recasts were at ₹46,416 crore in FY21.
“We do not see any concern on the asset quality front, and we expect that trend to continue. We have made additional provisions for restructuring applications that are yet to be implemented and also for general contingencies," Khara said.
SBI’s capital adequacy ratio under Basel III norms stood at 13.74%, an increase of 68 bps from a year earlier. Shares of SBI rose 4.3% to ₹401.1 on BSE on Friday, outperforming the benchmark Sensex’s 1.97% gain.
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