Despite subdued credit offtake, the country’s largest lender State Bank of India (SBI) posted a 51.88 per cent growth in net profit for the second quarter ended September 2020 (Q2FY21). Its profit after tax, on a standalone basis, rose to Rs 4,574 crore in Q2FY21 from Rs 3,012 crore in Q2FY20 on the back of a steady rise in net interest income and a dip in provisions for bad loans. Net profit for Q1FY21 was Rs 4,189 crore.
However, the lender flagged the risk of a rise in stress, especially in the loans to agriculture and small and medium size enterprises, in the coming months. The bank’s stock closed 1.12 per cent higher at Rs 207.05 per share on the BSE.
The net interest income (NII) grew 14.56 per cent to Rs 28,181 crore in Q2FY21, from Rs 24,600 crore in Q2FY20 and Rs 26,642 crore in Q1FY21, while the net interest margin (NIM) improved by 12 basis points (bps) to 3.34 per cent in Q2FY21 against 3.22 per cent in Q2FY20, and 3.24 per cent in Q1FY20.
Other income was flat at Rs 8,528 crore in Q2FY21, from Rs 8,538 crore a year ago quarter. It was Rs 7,957crore in Q1FY21.
Provisions and contingencies declined to Rs 10,118 crore in Q2FY21 from Rs 13,138 crore in Q2FY20. The provision coverage ratio (PCR) stood at 88.19 per cent in September, from 81.23 per cent a year ago. PCR was 86.32 per cent in Q1FY21. The bank’s gross non-performing assets (NPAs) declined to 5.28 per cent, from 7.19 per cent in September 2019, and 5.44 per cent in June 2020.
Net NPAs declined to 1.59 per cent from 2.79 per cent in September 2019. It was 1.86 per cent in June 2020.
Also, on a proforma basis, the bank saw slippage of Rs 14,388 crore from accounts which were standard as of August 31, 2020, but not stamped as bad loans in line the Supreme Court’s interim verdict. The agriculture and MSME sectors have a large share in such slippages.
But for the Supreme Court verdict, the GNPA and NNPA would have been 5.88 per cent and 2.08 per cent, respectively, said the statement.
During a media interaction, the bank’s management said lockdown collection and renewal of crop loan was impacted as bank staff could not reach out to farmers. Also, it was difficult for farmers to approach branches, leading to slippages. Now these crop loans will be renewed. Already Rs 6,000 crore worth of loans from this pool have been restored in October.
Going forward, the bank may see some kind of stress in small and medium enterprises, and in the agriculture sector too, said Chairman Dinesh Khara. SBI expects one-time restructuring of Rs 13,000 crore till December 2020 mostly for corporates and MSMEs and said it has received requests for restructuring of loans worth Rs 6,495 crore. None of them is large companies.
Credit grew 6.02 per cent (on a year-on-year (YoY) basis) to Rs 23.8 trillion, mainly driven by retail (personal) advances (14.55 per cent, YoY) and agri advances (4.19 per cent, YoY).
Khara said most high-frequency indicators (Apple mobility, PMI manufacturing and services, petrol consumption and air quality) were in the positive, showing improved economic activity. Against this backdrop, the lender expects credit to grow at over 8 per cent in FY21, against the earlier guidance of 7 per cent.
Total deposits grew 14.41 per cent to Rs 34.7 trillion in 12 months to September 2020. Of this, current account deposit grew 8.55 per cent while saving bank deposits saw an increase of 16.28 per cent.