 "SBI")
Country’s largest lender State Bank of India’s (SBI) net profit fell 6.7 per cent year-on-year (YoY) to Rs 6,068 crore in April – June quarter (Q1) of FY23 due to a sharp fall in non-interest income because of mark to market losses on the investment book. Net profit missed the Street estimate as analysts polled by Bloomberg had projected a net profit of Rs 8,392 crore.
The public sector lender had reported a net profit of Rs 6,504 crore in the corresponding period of the last year.
Net interest income of the lender grew 13 per cent YoY to Rs 31,196 crore in Q1FY23, on the back of improved credit offtake in all segments and improvement in asset quality, but non-interest income was down 80 per cent during the same period to Rs 2,312 crore as loss on investments was to the tune of Rs 6,549 crore.
Dinesh Kumar Khara, Chairman, State Bank of India, said, “As yields soften, we will recover most of the MTM losses. During this year, we have total redemption of over Rs 84,000 crore from the AFS book, which will also bring down the MTM losses”.
“We have done a sensitivity analysis. If we go by the g-sec rate of 7.30 per cent, we can write back almost Rs 1,900 crore worth of MTM provision which we have created already. The yields were trading at 7.10 per cent a few days earlier and at that level we could have a significant profit on account of the revaluation of the securities,” he said.
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The bank’s provisions will hold good even if the g-sec yields touch 7.45 per cent. Only when it breaches that mark, will the bank be required to make any further provisions. But considering the inflation number and the way the currency is strengthening, the bank management does not see the g-sec yields moving into those territories.
Net interest margin, a measure of profitability of banks, stood at 3.23 per cent, up 8 basis points YoY but down 17 basis points sequentially. NIMs are expected to go up because of the rise in benchmark policy rate moving up.
Loan loss provisions was down 15 per cent YoY, but up 31 per cent sequentially to Rs 4,268 crore in Q1FY23.
The asset quality saw improvement with gross non-performing assets (NPAs) of the lender standing at 3.91 per cent at the end of the June quarter, down 141 bps YoY and 6 bps sequentially. Similarly, net NPAs were down 77 bps YoY and 2 bps sequentially to 1 per cent during the same period.
While slippages were down 38 per cent YoY, they jumped 3 times sequentially to Rs 9,740 crore in Q1FY23.
While gross advances grew 15 per cent YoY and 3 per cent sequentially to Rs 29 trillion, domestic advances grew 14 per cent and foreign office advances grew 22.4 per cent. Domestic advances growth was driven by retail personal advances, which reported a 19 per cent YoY growth, out of which home loans grew by 14 per cent YoY. The corporate loan book grew 11 per cent; SME grew 10 per cent; and Agri book grew 9.82 per cent during the same period.
While gross advances grew 15 per cent YoY and 3 per cent sequentially to Rs 29 trillion, domestic advances grew 14 per cent and foreign office advances grew 22.4 per cent. Domestic advances growth was driven by retail personal advances, which reported a 19 per cent YoY growth, out of which home loans grew by 14 per cent YoY. The corporate loan book grew 11 per cent; SME grew 10 per cent; and Agri book grew 9.82 per cent during the same period.
“We are quite comfortably placed as far as growth in credit demand is concerned. Underutilisation of limits in working capital loans is about 49 per cent. Similarly, unutilized term loans are at 26 per cent. if we add up these numbers, this will be around Rs 5 trillion. We have got a decent pipeline of Rs 1.2 trillion. This clearly indicates the likely growth which we are going to witness in the corporate side. Retail engine continues to do well. We have got a decent visibility of the mortgage loans, express credit, etc. We expect that more corporates will be looking at us for availing credit facilities as compared to other options that were available with them in the past. Hence, we should have a decent credit growth going forward. We are aspiring for a 15 per cent credit growth in FY23,” Khara said.
Deposits of the lender was up 8.73 per cent YoY but down 0.14 per cent sequentially to Rs 40.45 trillion. Domestic CASA reported a 6.5 per cent YoY growth to Rs 17.67 trillion, taking the CASA ratio to 45.33.
On deposits we have been very mindful because currently our credit deposit ratio is somewhere around 63 per cent so we will like to see how best we can deploy our resources without really compromising on the NIMs, Khara added.
On the Yes Bank stake, Khara said, we are required to keep 26 per cent in Yes Bank and we will go by what is expected of us and we will be happy keeping 26 per cent. This matter has not been deliberated at the board level.
