SBI Q2 Results: Net Profit Rises 52% On Lower Provisions, Higher Core Income
A customer uses an automated teller machine (ATM) at a State Bank of India Ltd. (SBI) branch at night in Bengaluru, India. (Photographer: Karen Dias/Bloomberg)

SBI Q2 Results: Net Profit Rises 52% On Lower Provisions, Higher Core Income

State Bank of India’s net profit rose by more than half in the quarter ended September, aided by higher core income and a fall in provisions against bad loans over the year earlier.

Net profit of India’s largest lender rose to Rs 4,574 crore in the July-September period from Rs 3,012 crore a year ago, according to an exchange filing. That compares with a the Rs 3,689-crore consensus estimate of analysts tracked by Bloomberg.

These are SBI's first quarterly results since Dinesh Kumar Khara took over as chairman last month.

“Our assessment indicates upward movement in all categories of the economy. Our borrowers are telling us that business is coming back to pre-Covid levels. Collection efficiency has improved to 97.5% for us,” Khara told reporters after announcing the second-quarter results.

SBI’s net interest income—or core income—rose 14.55% year-on-year to Rs 28,181 crore compared with the Rs 27,089-crore forecast. The bank’s total income rose 3.4% over the year earlier to Rs 75,342 crore.

Asset Quality

SBI’s asset quality, too, improved during the reported quarter. Gross non-performing assets ratio fell 16 basis points quarter-on-quarter to 5.28%. Net NPA, too, improved 27 basis points over the preceding three months to 1.59%.

SBI said it followed the Supreme Court’s instructions in the ‘Gajendra Sharma vs Union of India' case where the judiciary had asked banks not to classify any accounts as NPA after Aug. 31. If the instructions were not in place, SBI’s gross and net NPA ratios would have been at 5.88% and 2.08%, respectively.

Slippages & Provisions

In the July-September quarter, the bank reported slippages worth Rs 2,756 crore compared with Rs 8,805 crore a year ago. But it disclosed that loans worth Rs 14,388 crore would have slipped to NPA, if the Supreme Court instructions were not in place.

Of the accounts that have received classification benefit from Supreme Court’s instructions, Rs 5,965 crore worth of loans were upgraded in October alone. The bank holds provisions worth Rs 3,194 crore against the pro forma accounts.

SBI’s provisions fell 49% year-on-year to Rs 5,619 crore in July-September. During the quarter, the bank made additional provisions worth Rs 239 crore against accounts that may be impacted by the Covid-19 pandemic. This increased the total provisions held by the bank against such accounts to Rs 3,247 crore as on Sept. 30.

“We are expecting further Rs 20,000 crore worth of slippages in the second half of this financial year. This has been calculated keeping in mind our usual run rate of Rs 10,000 crore worth of slippages every quarter. We do not think we will deviate from this,” said Khara.

Restructured Accounts

SBI, according to Khara, received restructuring requests for loans worth Rs 6,495 crore in the second quarter under the RBI’s one-time restructuring scheme for Covid affected loans. This included about Rs 4,000 crore corporate loans, Rs 1,300 crore retail loans and Rs 1,100 crore loans from the medium, small and micro enterprises.

The bank expects further Rs 13,000 crore worth of loans to come up for restructuring before Dec. 31, when the deadline for invoking the scheme ends. Most of these requests are likely to come from the corporate and MSME books, Khara said.

Advances & Deposits

SBI’s global advances rose 6% year-on-year to Rs 23.83 lakh crore, but were marginally lower sequentially, according to an analyst presentation.

  • Domestic advances were up 6.89% year-on-year to Rs 20.61 lakh crore.
  • Retail advances rose 14.55% year-on-year to Rs 7.85 lakh crore.

SBI continues to see traction in its home, auto and unsecured lending business. While unsecured personal loans have seen a 61% year-on-year rise in disbursements, the bank is not overtly concerned about asset quality. “About 95% of our retail unsecured personal loan borrowers are from the defence sector or are Government of India employees. We will not see high default rates in this segment,” Khara said.

The bank’s investment book also rose 35% year-on-year to Rs 13.29 lakh crore. “During the quarter, we have seen some sanctions in the corporate book, but they have not availed the credit yet. Corporates may want to tap the debt market right now to fund their needs. We will be there to serve the customers, wherever they want to raise money from,” Khara said.

SBI’s total deposits rose 14.4% year-on-year to Rs 34.7 lakh crore. Low cost current account, savings accounts deposits rose 15% over the year earlier to Rs 15.27 lakh crore, while term deposits grew 14%. CASA ratio as on Sept. 30 stood at 45.39% compared with 45.13% a year ago.

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