Net profit of State Bank of India (SBI), the country’s largest lender, fell 6.7% year-on-year (YoY) to Rs 6,068 crore in the April quarter to June (Q1) FY23 due to a sharp decline in non-interest income due to mark-to-market losses on the investment portfolio. Net profit missed Street’s estimate as analysts polled by Bloomberg had forecast net profit of Rs 8,392 crore.
The public sector lender had reported a net profit of Rs 6,504 crore in the corresponding period last year.
The lender’s net interest income increased 13% year-on-year to Rs 31,196 crore in the first quarter of FY23, driven by improved credit drawdown across all segments and improved asset quality, but non-interest income fell by 80% over the same period to Rs 2,312 crore while the investment loss was in the range of Rs 6,549 crore.
Dinesh Kumar Khara, Chairman of State Bank of India, said: “As yields fall, we will recover most of the losses from MTM. During this year, we have a total redemption of more than Rs 84,000 crore from the AFS book, which will also reduce MTM losses”.
“We did a sensitivity analysis. If we go by the g-sec rate of 7.30%, we can rewrite nearly Rs 1,900 crore of MTM provision that we have already created. Yields were trading at 7.10% a few days earlier and at this level we could have a significant profit due to the revaluation of securities,” he said.
The bank’s provisions will remain valid even if g-sec yields reach 7.45%. It is only when it infringes this mark that the bank will be required to take other measures. But given the inflation number and the way the currency is strengthening, bank management doesn’t see g-sec yields moving into those territories.
Net interest margin, a measure of bank profitability, came in at 3.23%, up 8 basis points year-on-year but down 17 basis points sequentially. NIMs are expected to rise due to the rise in the benchmark policy rate.
Provisions for loan losses fell 15% year-on-year but rose 31% sequentially to Rs 4,268 crore in Q1FY23.
Asset quality improved with the lender’s gross non-performing assets (NPA) standing at 3.91% at the end of the June quarter, down 141 basis points year-on-year and 6 basis points lower. sequential basis. Similarly, net NPAs declined 77 basis points year-on-year and 2 basis points sequentially to 1% over the same period.
While slippages fell by 38% year-on-year, they surged 3 times in a row to reach Rs 9,740 crore in the first quarter of FY23.
While gross advances increased 15% year-on-year and 3% sequentially to Rs 29 trillion, domestic advances increased 14% and foreign office advances increased 22.4%. Domestic advances growth was driven by retail personal advances, which grew 19% year-on-year, of which home loans grew 14% year-on-year. The business loan portfolio increased by 11%; SMEs increased by 10%; and Agri book increased by 9.82% over the same period.
“We are quite well positioned in terms of credit demand growth. The underutilization of working capital credit limits is approximately 49%. Similarly, unused term loans amount to 26%. if we add these numbers together, it will be around Rs 5 trillion. We have a decent pipeline of Rs 1.2 trillion. This clearly indicates the likely growth that we are going to witness on the business side. The retail engine continues to perform well. We have good visibility on mortgages, express credit, etc. We expect more businesses to turn to us for credit facilities than other options that were available with them in the past. Therefore, we should have decent credit growth going forward. We are aiming for 15% credit growth in FY23,” Khara said.
The lender’s deposits rose 8.73% year-on-year but fell 0.14% sequentially to 40.45 trillion rupees. Domestic CASA recorded 6.5% year-on-year growth to 17.67 trillion rupees, bringing the CASA ratio to 45.33.
Regarding deposits, we have been very careful as our deposit deposit rate is currently around 63%, so we would like to see how we can best deploy our resources without really compromising NIMs, Khara added.
Regarding Yes Bank’s stake, Khara said, we are required to keep 26% of Yes Bank and we will respect what is expected of us and we will be happy to keep 26%. This issue has not been discussed at the board level.