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State Bank of India reported a 7 per cent year-on-year decline in standalone third quarter net profit at ₹5,196 crore due to higher overall provisions and increase in employee expenses.
India’s largest lender had reported a net profit of ₹5,583 crore in the year ago quarter.
Though bad loan provisions came down 72 per cent yoy to ₹2,290 crore, the bottomline was weighed down by an increase in overall provisions, including for standard assets and Covid-related impact, and rise in employee expenses arising out of the 11th bipartite wage settlement. The loan portfolio showing signs of incipient stress (so-called special mention account/SMA) increased by ₹5,960 crore during the quarter to stand at ₹17,946 crore.
Chairman Dinesh Kumar Khara emphasised that his bank has put structures in place to pull back the SMA accounts.
Provisions
Khara said he is reasonably confident about the asset quality. The bank has a philosophy whereby it would like to provide for upfront even before the stress comes to the surface. “The moment we start having rumblings of stress, we try to provide for it,” he added.
Overall provisions, including for loan loss, standard assets, investment depreciation and other provisions, jumped about 43 per cent y-o-y to ₹10,342 crore. Employee expenses rose about 14.50 per cent y-o-y to ₹13,118 crore.
Net interest income (difference between interest earned and interest expended) nudged up 4 per cent to ₹28,820 crore. Total non-interest income, comprising fee income, profit/loss on sale of investments, forex income, recovery in advance under collection account, edged up about 1.5 per cent y-o-y to ₹9,246 crore.
The net interest margin (whole bank) declined to 3.12 per cent in the reporting quarter against 3.33 per cent in the year ago quarter.
Credit cost declined to 0.95 per cent against 1.80 per cent in the year ago quarter.
Bad loans decline
GNPAs declined to 4.77 per cent of gross advances as at December-end 2020 against 6.94 per cent as at December-end 2019. Net NPAs declined to 1.23 per cent of net advances as at December-end 2020 against 2.65 per cent as at December-end 2019.
With pro forma slippages (adjusted for the Supreme Court’s interim order on asset classification standstill), Gross and Net NPA ratio would have been 5.44 per cent and 1.81 per cent, respectively.
In the first nine months of FY21, the total pro forma slippages (₹16,461 crore) and restructuring requests received (₹18,125 crore) amounted to ₹41,216 crore. By the end of FY21, the bank has estimated that the total slippages and restructuring will not be more than ₹60,000 crore.
Business
Total deposits were up about 14 per cent y-o-y to ₹35,35,753 crore. Domestic current account deposits witnessed a growth of about 11 per cent, savings account (about 16 per cent), and term deposits (about 13 per cent).
Total advances increased about 7 per cent y-o-y to ₹24,56,607 crore, primarily driven by retail advances growth (about 15.50 per cent) and SME (about 6 per cent).
Khara said: “Corporate advances continue to witness a bit of subdued growth (about 2 per cent) but I hope that in the coming quarter and beyond that we will probably witness increase in these advances too. We have started seeing some kind of positive traction in the corporate advances, which I am sure will build up in the days to come.”
The SBI chief expects to end FY21 with a credit growth of about 7 per cent. From Q2FY22, SBI will be in a position to log double digit credit growth.
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