 "Dinesh Kumar Khara, Chairman, SBI")
State Bank of India, the country’s largest lender, on reported a muted growth in its net profit of 0.89 per cent Y-o-Y for April-June 2024 due to erosion in net interest margins and dip in other income and sharp rise in loan loss provisions.
The bank posted a net profit of Rs 17,035 crore during the Q1 of FY25 as compared to Rs 16,884.29 crore during the same period of the previous financial year.
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Sequentially, the profit declined by 17.70 per cent from Rs 20, 698 crore in Q4FY24. Bank’s stocks had closed 1.72 per cent lower at Rs 847.90 per share on Friday. The loan loss provisions grew 70.37 per cent Y-o-Y to Rs 4,518 crore in Q1FY25.
Responding to query on subdued profit growth, SBI chairman Dinesh Khara, in the post result press conference said “I do not think 0.89 per cent growth in profit is flat. There was an increase in provision due to ageing (of loans). We will get to see improvement in interest margins from the second quarter onwards and the busy season (starting October). Bank should be able to report a profit of Rs one trillion in FY25. This was the last quarter for him to sign results as chairman. He demits office next month on completion of extended term. He became chairman in October 2020.
Rahul Malani, Deputy VP - Fundamental Research, Sharekhan by BNP Paribas said SBI reported broadly in line performance on the earnings front, but negative surprise came from higher-than-expected slippages.
Its Net interest income — the difference between interest earned and interest expended — grew by 5.71 per cent Year-on-Year (Y-o-Y) to Rs 41,125 crore. Sequentially, NII declined by 1.27 per cent from Rs 41,655 crore in Q4FY24.
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The cost of deposits for domestic operations rose to 5.0 per cent in Q1FY25 from 4.55 per cent in Q1FY24 and 4.81 per cent in Q4FY24. The yield on advances grew to 8.83 per cent in Q1 from 8.78 per cent a year ago. They declined from 8.91 per cent in March 2024.
Net interest Margins (NIM) from domestic operation moderated 12 basis points Y-o-Y to 3.35 per cent for the reporting quarter. NIM was 3.47 per cent in Q4FY24. Khara said the bank is guiding for NIM to be between 3.2-3.4 per cent in FY25.
The other income declined to Rs 11,161 crore in Q1FY25 against Rs 12,063 crore in the first quarter of the previous financial year. There was reclassification of earnings from the investment book in line with revised regulatory norms for treasury operations, which came into effect from April 1, 2024.
Gross advances grew by 15.39 per cent Y-o-Y to Rs 38.12 trillion, of which retail loans grew by 13.60 per cent to Rs 13.68 trillion. Home loans grew by 13.64 per cent Y-o-Y to Rs 7.39 trillion.
Corporate advances grew by 15.92 per cent to Rs 11.38 trillion. Khara said the bank re-calibrated growth in the personal loan segment after delay in salary payment to employees by some state governments. It was a temporary shift.
The retail and corporate loan demand remains strong. The sanctioned pipeline for the corporate segment is about Rs 4.6 trillion with a higher share of the private sector than the public sector. The bank expects a 15 per cent loan in the current financial year.
Deposits grew by 8.18 per cent to Rs 49.01 trillion, out of which current and savings account (Casa) Deposit grew by 2.59 per cent. The CASA ratio fell to 40.70 per cent as on 30 June 24 from 42.88 per cent a year ago and 41.11 per cent sequentially. Bank would be able to maintain the CASA level (40.70 per cent), chairman said.
Referring to liquidity coverage, he said the bank maintained Liquidity Coverage Ratio (LCR) of 129 per cent at end June 2024 and bank has internal policy to maintain atleast 110 per cent level. He, however, declined to give an estimate of impact of proposed tightening of LCR norms saying that norms are yet to be finalized.
Besides, regular deposits, bank would raise money through Certificate of Deposits (CDs) upto Rs 50,000 crore and also look at infrastructure bonds. It has already raised Rs 20,000 crore via infrastructure bonds in the current financial year. He said the bank is working to grow deposits by 10 per cent in the current financial year and has taken steps like appointment of 500 managerial level persons to grow current accounts.
Its Gross Non-Performing Assets ratio at 2.21 per cent was down by 55 basis points, while net NPA ratio 0.57 per cent was down by 14 bps. The provision coverage ratio (PCR) including written-off accounts was at 91.76 per cent as compared to 91.41 per cent a year ago.
Fresh slippages during the quarter was Rs 7,903 crore in Q1FY25 up from Rs 7,659 crore during the same period of the previous year. Slippages from agriculture was Rs 2,500 crore, and from SME portfolio it was Rs 2,200 crore and retail segment including personal loans Rs 3,000 crore, Saloni Narayan, Deputy managing director (Finance) said.
Khara said the stress in the personal loans in Q1 was due to the fact that some of the state governments were not in position to pay salaries in time. They (salaries) were credited later. Now Rs 1,600 crore from slippages (of Rs 7,900 crore) have already been recovered. Bank does not see much challenge or stress in the personal loan segment, Khara said.
SBI had a capital adequacy ratio of 13.86 per cent as on June 30, 2024 down by 70 bps from a year ago. The Common equity tier-1 (CET1) ratio was at 10.25 per cent.
Khara said this capital does not factor in profits for the quarter. The current capital is adequate to meet normal business growth requirements and support additional credit of Rs 6.5-7 trillion.
Its board has approved a proposal to raise upto Rs 25,000 crore by issuing Basel lll compliant Additional Tier 1 Bonds and Tier 2 Bonds to domestic and overseas investors.
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