State Bank of India (SBI) reported a drop in net profit for the first time in 12 quarters, with its third quarter (Q3FY24) standalone net profit declining 35.5 per cent year-on-year (yoy) to ₹9,164 crore as it absorbed one-time provisions relating to increase in pension liabilities and dearness relief neutralisation. India’s largest bank had reported a net profit of ₹14,205 crore.

Chairman Dinesh Kumar Khara underscored that the bank provided a liability of ₹5,400 crore in Q3 to correct the anomaly in pension, which persisted from 2002 onwards. Further, ₹1,700 crore was provided due to dearness relief neutralisation for pre-2002 retirees.

Net interest income/NII (difference between interest earned and interest expended) was up 4.59 per cent yoy at ₹39,816 crore (₹38,069 crore in Q3FY23).

Other income, including fee income, earnings from foreign exchange and derivative transactions, profit or loss on sale/revaluation of investments, dividends from subsidiaries and recoveries made in written-off accounts, was almost flat at ₹11,459 crore (₹11,468 crore).

A sharp 63 decline in total provisions (at ₹4,072 crore vs ₹11,014 crore) supported the bottom line. This included a steep fall in standard asset provisions, a decline in income tax provisions, and a write-back in investment depreciation and other provisions.

The SBI chief noted that credit growth (gross advances growth was at 14.38 per cent yoy) has been robust and broad-based, and the bank has a loan pipeline of ₹4.6 lakh crore, with 75 per cent being accounted for by the private sector and balance by the public sector. Gross advances stood at ₹35,84,252 crore as at December-end 2023

“Deposit growth has rebounded, but sustained credit growth momentum has increased the wedge between the two.

“We are mindful of our liability portfolio as it provides a stable stream of resources…,” Khara said. Total deposits were up 13.02 per cent yoy and stood at ₹47,62,221 crore.

“We retain reasonable reserve ratios in the form of liquid assets….as at December-end 2023, excess SLR was at about ₹4 lakh crore and the liquidity coverage ratio stood at 131 per cent,” the SBI Chief said.

Asset quality improved, with gross non-performing assets (NPAs) declining to 2.42 per cent of gross advances as at December-end 2023 against 2.55 per cent as at September-end 2023. NNPAs were static at 0.64 per cent of net advances.

Fresh slippages increased to ₹4,960 crore in Q3FY24 against ₹3,831 crore in Q2FY24 and ₹3,098 crore in Q3FY23. The bank pulled back about ₹900 crore from the fresh slippages in Q3, Khara said.

Capital adequacy ratio (CAR) declined to 13.05 per cent in Q3FY24 from 14.28 per cent in Q2FY24.

The SBI Chief emphasised that if ploughback of nine months of retained profit ₹40,000 crore is considered, the CAR would be about 14.38 per cent. However, the bank is open to raising equity capital.

Rahul Malani, Deputy VP Sharekhan by BNP Paribas, said, “SBI has reported Q3FY24 where, in largely one-off items, the performance was dragged. Adjusted for this, the overall earnings remained healthy driven by lower credit cost despite weak core operating performance.”