Last updated: 05 Aug, 2021 | 09:19 am
Profit beats estimates: SBI reported its highest ever quarterly net profit of Rs 6,504 crore for the quarter ended June beating street expectations. Analysts had earlier anticipated a profit of about Rs 5,398 crore. On a yearly basis, profits jumped by 55% from Rs 4189 crore in the year ago period. The bank's net profit increased on the account of lower provisions and higher other income.
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 3.7% year on year to Rs 27,638 crore, below street estimates of Rs 28,804 crore. The bank’s other income rose 48% to Rs 11,803 crore. However, the Net interest margin declined 9 bps on-year to 3.24%.
SBI Q1 results: Important highlights
Asset quality declines: The bank's asset quality declined with the Gross NPA ratio rose to 5.32% of total advances as against 4.98% in the previous quarter. Net NPA ratio for the bank rose 27 bps sequentially to 1.77%.Total provisions and contingencies dipped 19.6% on-year to Rs 10,052 crore.The bank reported slippages worth Rs 15,666 crore during the reported period compared with Rs 3,637 crore a year ago and Rs 21,934 crore in the last quarter. Small and medium enterprises added Rs 6,416 crore worth of slippages while retail loans added Rs 5,268 crore worth of slippages during the quarter. Retail slippages largely came from the home loan and personal loan portfolio.
Deposits: The Bank's deposits rose 8.8% to Rs 37.2 lakh crore for the quarter ended June.Bank's CASA (current and savings account) deposits grew 11% on year to 16.59 lakh crore and now comprises 46% 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.
Loans: While the overall credit growth at SBI was muted at 5.6%, the bank saw sturdy growth in home loans and personal loans despite the disruption caused by the second wave.Personal loans grew 16.5% on-year in the June quarter, indicating that individuals are relying increasingly on borrowings for purchases. Within the personal loans category, gold loans saw a more than 300% on-year jump in the quarter, reflecting the current stress in household incomes. At the same time, home loans rose 11% on-year, reflective of the demand for housing in the country.
As on June 30, the bank’s restructured loans worth Rs 12,931 crore included retail loans worth Rs 2,977 crore and corporate loans worth Rs 9,954 crore. SBI held provisions worth Rs 1,949 crore against these loans. Under the extended one-time restructuring scheme announced by the regulator on June 4, SBI has already received applications for restructuring of loans worth Rs 7,400 crore.
SBI Q1 Results Review:
Despite the effects of the pandemic, SBI has delivered steady results for the Apr-Jun 21 quarter. The bank has been able to maintain a healthy deposit and advances growth rate. It is expecting a credit growth of 9% during this financial year. The bank's borrowers had under-utilised credit lines worth Rs 2.5 lakh crore and fresh proposals for Rs 1.32 lakh crore were in the pipeline, ensuring strong credit growth in the corporate book. The bank is seeing some traction in the government sector which is supporting roads and construction. Though the asset quality declined, financials showed that the bank is in much better shape than the frontline asset quality numbers project. SMA-2 accounts, loans on which payment is overdue for more than 60 days but less than 90 days, plummeted to Rs 3,326 crore in the quarter from Rs 6,843 crore in the March quarter.
SBI has reported steady performance in a challenging environment, with strong earnings led by controlled provisions. However, business trends were modest, impacted by the lockdowns. Asset quality remains broadly on track despite elevated slippage, led by Retail/SME. However, restructuring and the SMA pool remain in check. Firms expect slippage to subside going ahead, assuming there is no third COVID wave or no severe impact from it. Overall, PCR remains healthy at 68%. The bank is well on track to keep credit costs in check. Many firms including Motilal oswal maintained a 'buy' call while firms like Systematix maintained a ‘hold’ call. The consensus price remained between Rs 500 to 600. Shares of SBI reacted positively to the earnings and were up 3.1% at Rs 460.3 on the National Stock Exchange.