State Bank of India (SBI) on Friday reported an 81.2% year-on-year (y-o-y) jump in net profit to Rs 4,189 crore for the three months to June. The sharp jump in profits was fueled by an improvement in the asset quality and an exceptional gain arising from a stake sale of 2.1% in its subsidiary, SBI Life Insurance, which fetched it `1,539 crore.
The country's largest lender, which has taken the approval of shareholders to raise Rs 20,000 crore during the year, reported an operating profit of Rs 18,061 crore, up 36% y-o-y.
Provisions increased by 27% y-o-y toRs 13,872 crore. FE learnt that SBI has provided 100% for Dewan Housing Finance Corporation (DHFL), after declaring it a 'fraud' account. The lender has also made a provision of Rs 1,836 crore on account of Covid-19. The provision coverage ratio (PCR) in the June quarter has improved to 86.32%, up 698 bps y-o-y.
The asset quality at the bank has also shown a big improvement. The gross non-performing assets (NPAs) improved 71 bps to 5.44% from 6.15% in the March quarter. Like, net NPAs came down 37 bps sequentially to 1.86%.
The lender also reported a sharp decline in the loan book under moratorium to 9.5% in the second phase against 21.8% in the first phase. The Reserve Bank of India (RBI) had allowed lenders to grant moratorium relief to borrowers for three months from March 1, in the first phase and extended it by three months till August 2020.
SBI chairman Rajnish Kumar said that he is confident of a recovery after the moratorium is lifted from September, subject to regulatory directions. “Of the term loan book of Rs 16 lakh crore, housing loans worth Rs 35,000 crore, corporate loans of` 32,000 crore, which are rated AA and above are under moratorium, “Rajnish said, adding that borrowers were in a good position to service loans. However, he cautioned the bank was being 'very, very' watchful of the 5.5% of the loan book under moratorium and said the situation continues to be uncertain.
SBI’s net interest income (NII) improved 16% y-o-y to Rs 26,642 crore. This is despite the fact that gross advances grew just 6.58% y-o-y to Rs 23.85 lakh crore.
The domestic net interest margins (NIM) showed an improvement of 23 basis points (bps) in the June quarter to 3.24% from 3.01% in Q1FY20.
As per notes to accounts in the earnings release, SBI has provided for the entire balance amount of Rs 5,230.37 crore, on an exposure, on account of 'fraud'. SBI has a total exposure of Rs 10,083 crore of DHFL. Kumar said that he expects major chunk of recovery from the account by December this year. The lender is confident of recovering around Rs 11,000 crore in the next few quarters, Kumar said.
Gross advances grew 6.58% y-o-y to Rs 23.85 lakh crore. Kumar said that the lender was hopeful of achieving credit growth of 8% in the current financial year. The total deposits in the June quarter increased around 16% y-o-y to Rs 34.19 lakh crore. The domestic current account savings account (CASA) in the June quarter grew 16.69% y-o-y to Rs 14.98 lakh crore.
The credit cost as at the end of June 30, 2020, has declined 47 bps y-o-y to 1.56%. The cost-to-income ratio has improved 719 bps to 50.02% in the June quarter, compared to 57.21% in June 2019. The capital adequacy ratio has improved by 51 bps y-o-y to 13.40% as on June 2020.