MUMBAI: State Bank of India has reported a street-beating set of numbers with net income rising 12.5% on-year to Rs 19,160 crore in the June quarter, primarily driven by the gains from treasury operations and better asset quality which though did not help the nation’s largest lender as the margin has been hit by the crimped yields on advances in a falling interest rate regime.
The total income of the bank rose 10.31% to Rs 1.35 trillion in the reporting period, while the key net interest income stood almost flat at Rs 41,072 crore, down 13 bps on-year, as the key profitability gauge net interest margin (overall) slipped 32 bps to 2.90% while the domestic margin fell 33 bps to 3.02%. This has impacted the net interest margin and the yields on advances but a 55.40% surge in other income to Rs 17,346 crore has come cushioning this.
The bank management led by chairman CS Setty told reporters here Friday that he expects better days ahead for margins as well as yields on advances saying deposit repricing is almost done and the rep cut pass through has also been complete. Through the third quarter the MCLR repricing will also get over, stabilising the NIM and help the bank maintain yearly margin at 3%, the chairman added.
Setty underplayed the concerns about the tariff war impact on the banking system in general and also SBI in particular saying the five badly hit sectors have very diversified credit lines.
More than the second line impact on asset quality or inflation or the first line impact on credit demand, the real concern arising from the tariff war is the uncertainty it has created in the minds of corporates, Setty told reporters.
Explaining the better-than-expected net income, Setty said helping the bottom line, given the flat net interest income, is mostly cost management wherein we have significantly contained operational expenses. Then gains from sale of securities has almost trebled to Rs 6,326 crore during the reporting quarter from Rs 2,589 crore while gains from forex trading jumped manifold to Rs 1,332 crore from Rs 361 crore.
Operating profit rose 15.5% to Rs 30,544 crore, aided by higher non-interest income, which surged 55.40% to Rs 17,346 crore.
Return on assets improved to 1.14% from 1.10$, while return on equity moderated slightly to 19.70% from 20.98% and the cost-to-income ratio improved to 47.71 from 49.42, a year ago. Setty said the impact on the core capital from the recent Rs 25,000 crore QIP issue will be a few bps.
On the business front, gross advances rose 11.61% to Rs 42.55 trillion, driven by growth across segments such as retail personal loans which grew 12.56%, SME loans grew 19.10%, agricultural loans up 12.67%, and corporate loans 5.70%. The chairman expressed confidence in retaining the credit growth target set in April at 12% for the fiscal as he expects more corporates to take disbursement of loan actions which stood at Rs 3.89 trillion and while disbursement in the quarter stood at Rs 3.41 trillion.
Similarly deposits increased 11.66% to Rs 54.73 trillion, with current account deposits jumping 30.69% and savings deposits rising 4.71% helping the bank improve the low-cost Casa ratio to 39.36 sequentially but marginally lower than 40.70 a year ago. Setty also exuded confidence in getting to gather 10% more deposit in the current the fiscal, saying the bank is opening at least 59-60,000 new accounts every month.
Asset quality continued to strengthen, with gross non-performing assets ratio improving to 1.83 or Rs to 78,039.68 crore from 2.21 and the net NPA ratio falling to 0.47 or Rs 19,908.42 crore from 0.57. The credit cost for the quarter was steady at 0.47%.
The bank however, saw the fresh slippages rising, which Setty attributed to ageing loans, to Rs 7,945 crore from Rs 7,903 crore a year before. But the bank has already recovered Rs 1600 crore of this in July, the chief financial officer Saloni Narayan said.
In terms of ratios, the slippages improved to 0.75 from 0.84% and but rose sequentially from 0.42.
Setty said he would maintain both the ratios under 2 and 0.50 respectively going forward.
Despite street beating numbers, the SBI counter closed flat with a negative bias at Rs 805 as the broader market saw in a selloff mood.