State Bank of India reported a 7 per cent year-on-year (yoy) decline in first quarter (Q1FY23) standalone net profit at ₹6,068 crore due to mark-to-market (MTM) losses on investment book arising from hardening of bond yields even as its balance-sheet size crossed the ₹50-lakh crore mark..

The country’s largest bank had reported a net profit of ₹6,504 crore in the year ago period (Q1FY22). Net profit in the reporting quarter was down 33 per cent compared with preceding quarter’s (Q4FY22) ₹9,114 crore.

In the reporting quarter, NII (difference between interest earned and interest expended) was up 13 per cent y-o-y at ₹31,196 crore (₹27,638 crore in the year-ago quarter).

Non-interest income — comprising fee based income, trading income, recovery in written-off accounts, and others — declined about 80 per cent to ₹2,412 crore (₹11,803 crore), mainly on account of MTM impact on investment book.

MTM impact

“We saw a hit on account of MTM losses amounting ₹6,549 crore on our investment book. The MTM hit also had an adverse impact on the Bank’s RoA (return on assets) and RoE (return on equity), which were down 9 basis points and 203 points, respectively. We do not see any actual loss in this (investment) book. And as yields soften, we will recover most of these MTM losses,” said Dinesh Kumar Khara, Chairman.

As at June-end, RoA and RoE stood at 0.48 per cent (0.57 per cent as at June-end 2021) and 10.1 per cent (12.2 per cent), respectively.

Fresh slippages jumped to ₹9,740 crore in the reporting quarter against ₹2,845 crore in the preceding quarter. Khara emphasised that the Bank has already pulled back almost ₹2,800 crore out of the first quarter’s slippages.

Gross non-performing assets (NPAs) declined to 3.91 per cent of gross advances as at June-end 2022 against 3.97 per cent as at March-end 2022. Net NPAs declined to 1 per cent of net NPAs against 1.02 per cent.

Provisions towards non-performing assets (NPAs) declined 15 per cent yoy to Rs 4,268 crore (Rs 5,030 crore). The Bank wrote-back standard asset provisions amounting to Rs 1,295 crore (it made a Rs 1,578 crore provision in the year ago period). Investment depreciation provision was higher at Rs 1,503 crore (Rs 517 crore).

The SBI chief underscored that the consistenly improving asset quality is reflected in the credit cost, which stood at 61 bps for the quarter against 79 bps in the year ago quarter.

As at June-end 2022,special mention account (accounts showing signs of incipient stress) portfolio increased to ₹6,983 crore (₹3,544 crore as at March-end 2022).

Gross advances were up 14.93 per cent yoy to stand at ₹29,00,636 crore. Retail personal advances notched up 18.58 per cent yoy growth, followed by corporate (10.57 per cent), SME (10.01 per cent), agriculture (9.82 per cent) and foreign office advances (22.39 per cent).

“I feel we should have a decent credit growth going forward. We will aspire for continuing this kind (15 per cent) of credit growth in the remaining quarters of the current year,” Khara said.

Total deposits increased by 8.73 per cent yoy to stand at ₹40,45,696 crore as at June-end 222. Low-cost current account, savings account deposits declined a bit to 45.32 per cent of domestic deposits as at June-end 2022 against 45.97 per cent as at June-end 2021.