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State Bank of India (SBI), the country’s largest lender, reported a 67% growth in quarterly profit on higher net interest income and lower provisions.

Net profit rose to 7,627 crore in the three months ended 30 September, beating analysts’ estimates, from 4,574 crore a year earlier, the bank said in a statement on Wednesday.

A Bloomberg survey of 16 analysts had pegged SBI’s profit at 6,654.2 crore.

Net interest income, the difference between interest earned and expended, rose 10.7% to 31,184 crore in the quarter. Domestic net interest margin, a measure of profitability, expanded 35 basis points (bps) to 3.5% from the preceding June quarter.

The money set aside to cover potential loan losses fell 75% from a year earlier to 3,034 crore in the September quarter on an improvement in asset quality.

SBI also set aside funds to cover the entire 7,418.39 crore liability against an increase in family pension in the quarter.

Its gross non-performing assets (NPAs) as a percentage of total advances stood at 4.9%, down 38 bps from a year earlier.

“Coming to asset quality, the outcomes in this quarter have been quite encouraging. The first quarter saw an elevated level of fresh slippages as collections were severely impacted due to restrictions on mobility and concerns around the health and safety of our staff and customers. However, our ground-level forces have rallied back in the second quarter," SBI chairman Dinesh Khara said.

He added that there are no major concerns related to asset quality because the underwriting has improved significantly, and the collection machinery on the ground has become activated.

The bank expects to grow its loan book by 10% in the current fiscal. While retail is expected to grow faster than the overall book, corporate loan growth is also expected to pick up. Credit in the September quarter rose 6.2% from a year earlier, while deposits grew 9.8%.

“When it comes to corporate, this month we have seen decent demand from corporates, too, and, if that continues, we should be in a position to see decent numbers. The unutilized loan limits might decline from the current 50% to 30-35%," Khara said.

The bank, he said, has 4.6 trillion of sanctioned loan awaiting to be availed of. Working capital limits for large corporates are unutilized to the extent of 50%. The bank expects new capacity addition in the iron and steel sector and believes oil companies might also start availing of their working capital limits.

“There is a clear visibility of demand, and with the demand coming in, capacity augmentation is happening, and I hope that by the end of the current quarter or the next quarter, there should be a significant improvement in capacity utilization, which will lead to availing of term loans and working capital," Khara said.

The bank disclosed that it restructured loans of 30,312 crore, or 1.2% of its loan book, under the two covid-19 debt recast windows.

SBI’s capital adequacy ratio under Basel III norms stood at 13.35%, down 137 bps from a year earlier.

Shares of SBI rose 1.14% to 527.65 on Wednesday, while the benchmark Sensex lost 0.43% to 59,771.92.

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