The State Bank of India, the country’s largest public-sector lender, logged a record profit of Rs 6,504 crore in Q1 of the current financial year. This is an over 55% y-o-y rise in its standalone profit after tax. SBI had posted a profit of Rs 4,189 crore in the same quarter in the year-ago period. Lower provisions and a spike in other income contributed to the bank reporting a stellar bottom line in Q1 FY2022. The overall number is well beyond what the street had estimated the bank would report.
The bank also beat street estimates on net interest income, reporting a 3.7% increase y-o-y to Rs 27,638 crore in the first quarter of the year in review.
The bank’s other income rose 48% to Rs 11,803 crore led by recovery of nearly Rs 1,692 crore from Kingfisher Airlines.
The overall asset quality, however, weakened for the bank with gross non-performing asset ratio at 5.32% compared to 4.98% reported in the previous quarter (Q4 FY2021). Net NPA ratio rose 27 basis points sequentially to 1.77%.
While gross advances for the bank rose 5.79% y-o-y to Rs 25.24 lakh crore, total deposits rose 8.8% to Rs 37.2 lakh crore.
In the loan segment, the lender’s domestic retail loans grew 16.5% y-o-y to Rs 8.72 lakh crore while the home loan segment contributed over Rs 5 lakh crore to the bank’s loan book.
SBI’s market capitalization surpassed the Rs 4 trillion mark ahead of its June quarter results
and the stock price of SBI soared to an all-time high of Rs 456.15 after a 2.16% spike in intra-day trade upon the results announcement. (03:30 PM August 4, 2021).
The banks attributed its degradation in asset quality to the spread of the COVID-19 pandemic that led to a decline in economic activities and movement in financial markets, and therefore the collections for the bank. SBI says that the Bank is gearing up on several fronts to mitigate all the challenges. Major challenges for the Bank could be extended working capital cycles, fluctuating cash flow trends, and the probable inability of the borrowers to meet their obligations against the loans in a timely manner.
“Around 50% of our home loan book is to non-salaried customers which belong to the SME segment,” said Dinesh Khara, chairman of SBI, adding, “The slippages are largely because of the disruption in the SME segment.” He also said, “SBI is expecting a credit growth of 9% during this financial year. The under-utilisation of credit lines by borrowers in our corporate clients group has dropped to 25%,” Khara said. “That’s a positive.”
The lender beat market estimates following which the stock skyrocketed at Dalal Street. The bank has reported the highest net profit in a quarter, uplifting the market sentiment. Analysts, according to media reports, expect the bank to have healthy performance post the second-wave speed breakers. India’s largest bank is also expected to be better placed in terms of market capitalization, provisions, and asset quality, and buoyed by recoveries from United Breweries. However, analysts also suspect a weakened business momentum due to an industry-wide slowdown amid the pandemic.