SBI logs highest-ever quarterly profit at Rs 13,265 crore in Q2 on better asset quality, lower provisions

The country's largest lender had earned a profit of Rs 7,627 crore in the same quarter a year ago

State Bank of India on Saturday reported the highest-ever quarterly profit at Rs 13,265 crore, up 74 per cent year-on-year, for the September quarter of FY23, buoyed by robust loan sales, higher interest income and lower provisions.

The country's largest lender said its total income increased to Rs 88,734 crore during the quarter under review from Rs 77,689.09 crore a year ago. The key net interest income rose 13 per cent to Rs 35,183 crore from Rs 31,184 crore.

Of the total income, more than one-fourth or Rs 24,400 crore came from investment gains, though the bank has not booked profit from government securities in which it holds an additional exposure of over Rs 3.85 lakh crore, chairman Dinesh Kumar Khara told reporters during the earnings conference at the bank's headquarters.

As the bank nearly passed on the entire rate by the central bank to borrowers as well as depositors, its domestic net interest margin improved to 3.55 per cent from 3.50 per cent earlier.

The asset quality of the bank improved with the gross non-performing assets (NPAs) crashing by 138 basis points (bps) to 3.52 per cent from 4.90 per cent a year ago, while net NPAs nearly halved to 0.80 per cent of the advances from 1.52 per cent in the year-ago period.

As a result, provisions for bad loans declined to Rs 2,011 crore from Rs 2,699 crore on-year, the chairman said.

In absolute terms, the gross NPAs declined by 13.83 per cent to Rs 1,06,804 crore and the net NPAs by 36.5 per cent to Rs 23,572 crore.

While the bank earned an interest income of Rs 79,860 crore, up 15 per cent, its interest expenses rose 16.6 per cent to Rs 44,676 crore. Of the total income, the key net interest income rose 12.83 per cent to Rs 35,183 crore as its NIM (Net Interest Margin) improved by 5 bps to 3.55 per cent.

Forecasting a marginally lower credit growth for the rest of the fiscal at 14-16 per cent, down from 20 per cent in the reporting quarter led by the corporate books, Khare said, "now that we've also got treasury excess investment of (Rs 3.85 lakh crore) which we haven't booked in this quarter, but expect to unwind in the course of the year, we're confident of supporting higher credit growth."

He also said keeping too much capital idle is not the right way of fund utilisation and that he is comfortable with an under-10 per cent core capital for the bank, which stood at 9.53 per cent, down 23 bps from the year ago period.

At a net NPA ratio of under 1, at 0.80, precisely down 72 bps, and gross NPA ratio of 3.52, down by 138 bps, the bank's provision coverage ratio jumped by 788 bps to 77.93. The slippage ratio improved by 33 bps to 0.33 as a result credit cost improved by 15 bps to 0.28 per cent.

Explaining the reason for the record loan sales, the chairman said the second quarter was a busy season, "that is why we had a strong credit growth. But I still expect going by the current trend, we should have credit growth of 14-16 per cent in the current financial year. Our corporate book has a loan pipeline of Rs 2.4 lakh crore of which Rs 1.27 lakh are pending for disbursals".

He said the corporate book growth of 21.2 per cent in Q2 was led by funds for capital expenditure which constituted around 40 per cent of the total disbursal of Rs 9.2 lakh crore, and working capital loans constituting the rest. There has been hardly any refinance demand, he said.

Also, there is an improvement in capacity utilisation levels, leading to demand for working capital loans, and the kind of demand we have seen on the ground gives us the confidence that corporate loan demand will sustain. But we also know that credit growth is a function of real economy".

While total advances rose 20 per cent in the quarter to Rs 30.35 lakh crore. Of this, the retail (personal) loans were at Rs 10.74 lakh crore, up 18.84 per cent, and retail home loans were up 14.57 per cent at Rs 5.94 lakh crore.

The overall book was also aided by much higher loan growth in its overseas books, which rose over 32 per cent to Rs 16 lakh crore, most of which was led by local corporate loans and trade finance and not loans by domestic companies operating overseas.

Overall credit growth stood at 19.93 per cent, of which domestic advances grew 18.15 per cent and foreign branches grew 30.14 per cent. Domestic advances growth driven by the corporate book which increased 21.18 per cent, followed by retail personal loans which grew 18.84 per cent and retail home loans that touched Rs 6 lakh crore.

SME and agri loans grew 13.24 per cent and 11 per cent, respectively.

Deposits grew 9.99 per cent to Rs 41.9 lakh crore of which CASA (Current Account Saving Account) stood at Rs 17.97 lakh, up 5.25 per cent, or 44.63 per cent of the total deposits.

On deposit growth, Khare said much of it will depend on how the industry grows. "I can only say that we will not be seen lagging behind the industry. So the CASA ratio... we are at 44.63 per cent now, and our effort will be to take this to 45 per cent by March. The bank had last month increased deposits rates for over Rs 10 crore by 30 bps to 4 per cent but retained the pricing for under-Rs 10-crore account balance at 3.70 per cent.

On the domestic NIM which was printed in at 3.55 per cent in Q2, he said, "Our effort is to maintain it around what we have done. There are many factors and they are very dynamic and we've to be mindful of those factors."

Capital adequacy ratio improved to 13.51 per cent from 13.35 per cent year-on-year.

On a consolidated basis, the SBI Group reported a 66 per cent surge in net income at Rs 14,752 crore for the reporting quarter as against Rs 8,890 crore a year ago. The consolidated income rose to Rs 1,14,782 crore from Rs 1,01,143.26 crore a year ago.