Five takeaways from SBI results

The bank seems to be getting its act right by increasing advances at a time when the economy is expected to pick up

SBI had touched a new one-year high ahead of its results, at Rs 2,650, a sharp 30 per cent jump in nearly a week. The bank’s management did not disappoint with its numbers. Against an expected profit of Rs 3,041 crore for March quarter 2014 SBI recorded a net profit of Rs 2,824 crore. Though the profit is lower than previous year’s Rs 3,299.22 crore, this has been on account of higher provisioning.

Following are the five key takeaways from SBI’s numbers

1. The bank's net interest income increased by 16.7 per cent during the March 2014 quarter over the same period previous year. This was because advances shot up by 15.44 per cent, largely due to higher advances to large accounts, which increased by 38.04 per cent.

2. A conscious effort to control quality of its asset is clearly visible from the fact that though large corporates have been give loans, SBI has restricted itself from lending to SME (small and medium enterprises). Advances to the SME segment have fallen by 2.37 per cent, as compared to a robust 15.44 per cent overall growth. As a result, both gross and net NPA (non-performing assets) have fallen from 5.75 per cent to 4.95 per cent and 3.24 per cent to 2.57 per cent over the sequential quarter.

3. Overall, there seems to be an improvement on asset quality. Fresh slippages have come down from Rs 11,438 crore to Rs 7,947 crore sequentially. Upgradation has moved to Rs 5,054 crore as against Rs 1,230 crore while recoveries have improved to Rs 3,389 crore versus Rs 1,538 crore sequentially.

4. While asset quality has improved, SBI has managed to reduce its employee cost while simultaneoulsly improving its low-cost CASA (current account and savings account) deposits to 44.43 per cent. As a result the bank has maintained its net interest margin at 3.49 per cent.

5. SBI seems to be getting its act right by increasing advances at a time when the economy is expected to pick up. But in order to really contribute to the economy, the bank will have to lend a helping hand by taking the SME segment in its stride. In a growing economy asset quality will not be too much of an issue.