Q3 earnings: State Bank of India net falls, outlook good

The lender’s Covid-related general contingency provisions stood at Rs 6,008 crore.

State Bank of India (SBI) on Thursday reported a standalone net profit of Rs 5,196 crore for Q3FY21, down 7% year-on-year (y-o-y) partly due to the impact of a large one-time recovery from the sale of Essar Steel in the base quarter and an increase in provisions of 43% y-o-y.

Nonetheless, the SBI stock rose nearly 6% as chairman Dinesh Khara indicated there was a chance the lender would report smaller than anticipated credit costs. “I will not deny that there is a strong possibility of us undershooting the guidance. Our credit cost as of December 2020 stands at 1.1% so we should do better than the guidance we had given of 2%,” Khara said.

Moreover, the chairman said the guidance for slippages and restructured exposures would not be revised. “Together, the total slippages and restructuring up to December are about Rs 41,000 crore and I’m quite confident we should be in a position to close it within Rs 60,000 crore,” he said.

Asset quality at the lender improved as the gross NPA ratio fell 51 basis points sequentially to 4.77% and the net NPA ratio slid 36 bps to 1.23%. But for the apex court’s interim order, the gross and net NPAs ratios would have been 5.44% and 1.81%, respectively. Slippages fell 91% sequentially to `237 crore. The bank has received restructuring requests for loans worth Rs 18,125 crore of which Rs 11,000-odd crore are corporate loans. In the absence of the judicial stay on recognising new bad loans after August 31, SBI would have clocked slippages worth Rs 16,461 crore during the nine months to December 2020. The lender’s Covid-related general contingency provisions stood at Rs 6,008 crore.

The bank lent close to Rs 73,000 crore during the December 2020 quarter; its net interest income rose 3.75% y-o-y to Rs 28,820 crore. The operating profit fell 4.88% y-o-y to Rs 17,333 crore and the domestic net interest margin remained flat sequentially at 3.34%.

SBI expects a loan growth of 7% for the current year. Khara said even if private sector capex takes off, it would not immediately result in credit growth. “Right now, we see growth coming from public sector entities,” he said, adding that mid-corporate drawdowns are at 50% of the overall limits available, while for large corporates it is around 20-25%.The chairman said he expects double-digit credit growth from Q2FY22.

The lender’s deposits stood at `35.36 lakh crore at the end of December 2020, up 13.7% over December 2019. The CASA ratio was up 43 bps y-o-y at 45.15%.