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Mumbai: State Bank of India (SBI), the country’s largest lender, on Saturday reported a 62.3% year-on-year (y-o-y) jump in net profit to 8,432 crore for the quarter ended December on the back of lower provisions.

SBI’s net interest income -- the difference between interest earned and expended -- stood at 30,687 crore in Q3, up 6.5% y-o-y, but down 1.6% sequentially. Its domestic interest margin, a measure of profitability, was at 3.4%, 10 basis points (bps) lower than the September quarter.

“Going forward we will have a much healthier growth as far as NIIs are concerned and we do not envisage much of a challenge. The way things are now evolving, a significant portion of our book is linked to the external benchmark. So, depending on the external benchmark we will be in a position to have much better earnings," said Dinesh Khara, chairman, SBI.

While the bank reported lower aggregate provisions for the three months through December, it set aside more to cover bad loans. Loan loss provisions in Q3 stood at 3,096 crore, up 35% y-o-y on account of higher provisions for ageing bad loans.

Its gross non-performing assets (NPAs) as a percentage of total advances stood at 4.5%, down 40 bps sequentially and 27 bps from the same period last year.

“While the elevated level of slippage in the first quarter of the year was due to exceptional circumstances, we have been able to pull back a significant portion of those slippages. This indicates our long-term strategy of maintaining asset quality through quality credit underwriting using analytics for early warning signals and focus on collections which have now started delivering consistent results," said Khara.

He said that the bank has implemented recast of loans with aggregate outstanding of 19,900 crore under the second recast window, with loans of 2,583 crore being recast during the December quarter. The bank’s total restructured book under covid-19 resolution plans one and two stood at 32,895 crore and was 1.2% of its total loan book. Khara said that the bank has also made additional provisions against restructured accounts over and above the regulatory requirements.

The bank expects to grow its loan book by 9% in FY22. In Q3, SBI witnessed a domestic credit growth of 6.47% year-on-year (y-o-y) and a deposit growth of 8.58% y-o-y. While its whole bank advances, including foreign offices, grew 8.47%, its total deposits grew 8.83% y-o-y.

“We have got unutilized portion of about 2.06 trillion for working capital and 1.99 trillion in term loans. In January, we have seen a growth of 50,000 crore in advances. I am quite confident that going forward we will have a decent growth in corporate credit and I do not envisage any challenge on this," he said.

Khara said that there is a definite improvement in utilization of limits. The unutilized portion has come down from 52% in working capital loans as of September 2021, to about 43% now. Even in term loans, the undisbursed portion has come down on a y-o-y basis, from about 23% in December 2020 to about 22% now.

“This is a clear sign of the better utilization of sanctioned limits," he said.

SBI’s capital adequacy ratio under Basel III norms stood at 13.23%, down 127 bps y-o-y. The ratio will increase 94 bps if the profits of the first nine months of this financial year are included.

ABOUT THE AUTHOR

Shayan Ghosh

Shayan Ghosh is a national writer at Mint reporting on traditional banks and shadow banks. He has over a decade of experience in financial journalism. Based in Mint’s Mumbai bureau since 2018, he tracks interest rate movements and its impact on companies and the broader economy. His interests also include the distressed debt market, especially as India’s bankruptcy law attempts recoveries of billions worth of toxic assets.
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