Last updated: 04 Feb, 2021 | 02:32 pm
Profit beats estimates: The net profit dropped 7% on-year to Rs 5,196 crore in Q3FY21, beating street expectations. Analysts had earlier anticipated a profit of about Rs 4,479 crore. The bank's net profit was impacted by higher provisions. In the year ago period, SBI had reported its highest-ever quarterly profit, aided by Rs 11,000-crore worth recoveries from Essar Steel Ltd's resolution under the Insolvency & Bankruptcy Code.
Net interest income rises: A bank's primary business is to borrow money and lend the same at a rate higher than the rate at which they borrowed. The income generated from this differential is known as net interest income. Net interest income for SBI grew 4% YoY to Rs 28,820 crore, ahead of the estimates of Rs 28,400 crore. Net interest margin declined 25 bps on-year to 3.34%.
Asset quality improves: The bank's asset quality improved with the gross non-performing asset ratio reducing to 4.77% of total advances as against 5.28% in Q2. Net NPA ratio for the bank fell 36 basis points QoQ to 1.23%. Provisions and contingencies increased significantly by 42.6% on-year to Rs 10,342.39 crore in Q3FY21.
Update on moratorium: The RBI had permitted banks to offer a moratorium to borrowers until the end of August to help them mitigate the impact of the pandemic. Following this, the Reserve Bank of India in September permitted one-time restructuring of advances of companies and retail borrowers hit by the Covid-19 pandemic. While these assets don't have to be marked as NPAs, banks have been asked to disclose details of the restructured assets.
SBI said that if the bank were to account for classified borrower accounts as NPAs after August 31, the gross NPA would have been 5.44% (as against 5.28%) for December quarter. The Net NPA ratio would have been 1.81% (as against 1.23%).
Deposits: The Bank's deposits aggregated to approximately Rs 35.35 lakh crore as of Dec-20, a growth of around 13.64% on-year. Bank's CASA (current and savings account) deposit now comprise 43% of total deposits of the bank. CASA capital is the cheapest source of capital for banks. The higher the number the more profit a bank can earn. Advances were up 6.73% on-year to Rs 24.56 lakh crore.
Despite the effects of the pandemic, SBI has delivered strong results in the Oct-Dec 20 period. The bank has been able to maintain a healthy deposit and advances growth rate, on the back of a festive pick-up. Loan growth driven by sustained strong traction in retail portfolio.
The company is seeing some recoveries in sectors like textiles, aviation and airports, hotels and tourism. The government's thrust on the infrastructure sector in Union Budget 2022 should help the bank extend more credit lines to corporate borrowers as the demand situation in the economy improves. SBI is aiming for about 7% credit growth for this financial year, and double-digit growth by Q2FY22.