India’s largest public sector lender State Bank of India (SBI) on Friday reported a net profit of ₹4,189.3 crore in the June quarter of FY21, up 81% year-on-year (y-o-y), owing to a rise in net interest income.
Its profit was also backed by a one-time gain of ₹1,539.73 crore on sale of a 2.1% stake in SBI Life Insurance Company Ltd in June.
SBI’s net interest income (NII) or the difference between interest earned and expended, rose 16% on a y-o-y basis to ₹26,641.5 crore. The bank’s profit came in substantially higher than Bloomberg consensus estimate of 15 analysts that pegged it at ₹3,375 crore. In the June quarter of FY20, the bank had reported a net profit of ₹2,312 crore.
While SBI’s total provisions rose 36% y-o-y to ₹12,501 crore in the June quarter, its other income declined 0.7% y-o-y to ₹7,957 crore in the same period. SBI said that during quarter it has made an additional provision of ₹1,836 crore for covid-19 and it hold total provisions of ₹3,008 crore for the pandemic as on 30 June.
Rajnish Kumar, chairman, SBI said that 9.5% of the bank’s loan book is under moratorium as on 30 June. “The bank has an outstanding term loan book of ₹16 trillion and 90.5% of this book is where two or more installments have been paid," said Kumar.
According to Kumar, most corporates and particularly those rated AA and AAA are in a position to service loans from September. “As of now the scrutiny of the accounts which has been done by the bank, indicates that most of these corporates will be able to repay from September, depending upon what happens to the moratorium in RBI policy. We believe that they are preserving cash," said Kumar.
SBI’s net interest margin (NIM), a key measure of profitability, improved 30 bps sequentially to 3.24% in the June quarter.
The bank’s asset quality improved in Q1FY21, with gross non-performing asset (NPA) ratio – gross bad loans as a percentage of total loans – declining 71 basis points (bps) sequentially to 5.44%. Among loan categories, while corporate bad loan ratio declined 586 bps y-o-y to 7.73%, its agriculture gross NPA ratio rose 229 bps in the same period.
In the June quarter, SBI saw slippages of ₹3,637 crore, down from ₹16,212 crore in the same period last year. Its recoveries and upgradations were lower in Q1 FY21 on a y-o-y basis to ₹3,608 crore.
“If there is a prolonged recession or a situation where recovery does not happen, corporate slippages may happen. But, the book of the bank and its composition, as compared to what happened in 2017-18, is very different," said Kumar.
Kumar said that the bank is expecting recoveries of ₹11,000 crore in the next two quarter of September and December.
“Recoveries were slightly muted in the first quarter because of the economic condition, but we are expecting it to significantly rise. As of now, given the moratorium that we have, we are not expecting any fresh addition to the slippages," he said.
SBI’s total deposits rose 16% y-o-y to ₹34.19 trillion and its total advances rose 6.6% y-o-y to ₹23.85 trillion. Its capital adequacy ratio under Basel III guidelines was at 13.4% as on 30 June. On home loans, auto loans and personal loans, Kumar said a U-shaped credit curve is visible where April 2020 was the bottom and is now showing an upward trend.
“Of course, these are early signs and we would like to wait for another quarter. As of now the trend with regard to sanctions and disbursements in these segments particularly is showing an upward trend," said Kumar.
Shares of the bank on the BSE closed at ₹191.45, up 2.63% from its previous close. The benchmark Sensex was down 0.34% to 37,606.89 points.