State Bank of India net up 25% on other income boost

State Bank of India (SBI) on Friday reported a net profit of Rs 3,879 crore for the three months to September, up 25% from a year earlier, on the back of higher other income, which rose 35.5% year-on-year (y-o-y) to Rs 6,197 crore.

The lender saw an improvement in asset quality with slippages falling 20% sequentially even as chairman Arundhati Bhattacharya was cautiously optimism about a pick-up in the economy saying more projects were beginning to take off.

“I would say that though the economy is on the mend, I do believe that it still needs to move up a little more quickly before we can see stability,” Bhattacharya said at a press conference. The declining slippage numbers she believes are an indication the worst may be over. “As far as the downturn in the economy is concerned, we are definitely seeing some movement upwards. The project pipeline which consisted of mostly renewable projects and brownfield ventures is getting bigger with road projects now getting added to the list,” she said, adding that the bank is beginning to see some more traction in the new projects pipeline.

The results cheered the Street and shares of India’s largest bank rose as much as 4.5% on the BSE in intraday trade, ending at R243.25 each, up 3.9%. On a year-to-date basis, the SBI stock is down 22% against a 5% drop in Sensex in the same period.

SBI’s other income comprised Rs 485 crore profit repatriated from overseas, Rs 1,000 crore of bond portfolio profit and Rs 627 crore of recoveries from written-off accounts. Bhattacharya said this was probably the first time the bank had repatriated profits from abroad and added these were being used to improve its provision coverage ratio to 70.48%, up 99 basis points sequentially. “We need to bring in more capital. This is in line with the government’s thinking that capital or profits should be added to the book so that it goes into your capital,” Bhattacharya explained.

The SBI chairman said the lender would grow its loan book at around 12-13% this year.

“I still believe we can grow at 14% and we are confident that we can grow at the levels that we have projected. However, to be very cautious, I’ll say something like 12-13% but we still will try to achieve the numbers we have projected earlier,” she added.

Operating profit at the public sector lender rose 20.6% y-o-y to Rs 10,266 crore, while its domestic net interest margin fell 17 bps sequentially to 3.32%. Net interest income — the difference between interest earned and interest expended — rose 7.37% y-o-y to Rs 14,253 crore.

Total advances grew 10.3% y-o-y to Rs 12.42 lakh crore while deposits grew 10.8% y-o-y to Rs 16.34 lakh crore in the quarter. Large corporate advances grew 22% y-o-y to Rs 2.33 lakh crore and Bhattacharya said it has mainly come from refinances.

The bank restructured loans worth Rs 3,185 crore in the quarter and saw fresh slippages of Rs 5,875 crore, down 20% sequentially. “So overall, I think we are beginning to view the end of this entire NPA cycle and I am more confident about the quality of assets going forward,” she said.

SBI’s asset quality improved in the September quarter, with gross non-performing assets (NPAs) as a percentage of gross advances falling 14 bps sequentially to 4.15%. The net NPA ratio also witnessed a sequential fall of 10 bps. The largest chunk of NPAs came from the mid-corporate segment, which reported a gross NPA of 10.62%, followed by agriculture at 8.66%.

Recoveries during the quarter at Rs 892 crore were 26% lower than in the preceding quarter and the bank also upgraded accounts worth Rs 629 crore from NPA to standard category.