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SBI Q2 net profit rises 66.7% as provisions drop

MUMBAI: State Bank of India (SBI), the country’s largest lender, on Wednesday reported a 66.7% year-on-year (y-o-y) growth in its Q2 net profit to ₹7,627 crore on the back of higher net interest income and lower provisions.

A Bloomberg estimate of 16 analysts had pegged SBI’s September quarter profit at ₹6,654.2 crore.

SBI’s net interest income, the difference between interest earned and expended, stood at ₹31,184 crore in Q2, up 10.7% y-o-y. Domestic interest margin, a measure of profitability, was at 3.5%, 35 basis points (bps) higher sequentially.

The bank also reported lower provisions on account of an improvement in asset quality in the quarter. Provisions were at ₹3,034 crore in Q2, down 74.5% from the same period last year. SBI also provided the entire liability of ₹7,418.39 crore in Q2 to cover against the revision in family pension, disclosing it as an exceptional item. Its gross non-performing assets (NPAs) as a percentage of total advances stood at 4.9%, down 38 basis points (bps) y-o-y.

“Coming to asset quality, the outcomes in this quarter have been quite encouraging. The first quarter saw elevated level of fresh slippages as collections were severely impacted due to restrictions on mobility and concerns around health and safety of our staff as well as customers. However, our ground level forces have rallied back in the second quarter,” said Dinesh Khara, chairman, SBI.

Khara said there were no major concerns related to asset quality because the underwriting has improved significantly and the collection machinery on the ground has become activated.

The bank expects to grow its loan book by 10% in FY22. While retail is expected to grow faster than the overall book, corporate loan growth is also expected to pick up, albeit depending on how much funds companies require. In Q2, SBI witnessed a credit growth of 6.2% year-on-year (y-o-y) and a deposit growth of 9.8% y-o-y.

“When it comes to corporate, this month we have seen decent demand from corporates too and if that continues, we should be in a position to see decent numbers. The unutilized loan limits might decline from the current 50% to 30-35%,” said Khara.

The bank, he said, has ₹4.6 trillion of sanctioned loan awaiting to be availed of. Working capital limits for large corporates are unutilized to the extent of 50%. The bank expects new capacity addition in the iron and steel sector and believes oil companies might also start availing of their working capital limits.

“There is a clear visibility of demand and with the demand coming in, capacity augmentation is happening and I hope that by the end of current quarter or the next quarter there should be a significant improvement in capacity utilization which will lead to availment of terms loans and working capital,” added Khara.

The bank disclosed that it has restructured loans worth ₹30,312 crore or 1.2% of its loan book under the two covid-19 debt recast windows.

SBI’s capital adequacy ratio under Basel III norms stood at 13.35%, down 137 bps y-o-y.

Shares of SBI on the BSE closed at ₹527.65 apiece on Wednesday, up 1.14% from its previous close.

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