MUMBAI: State Bank of India has said its net income has soared a hefty 84.3% to Rs 16,891 crore in the December quarter, aided mostly by the low-base in the year-ago period when the nation’s largest lender had taken a one-time hit of Rs 7,100 crore towards pension liabilities following the wage revision and better asset quality coupled with higher advances.
However, despite reporting a street–beating set of numbers, the market pummeled the stocks of the bank on Thursday yanking it down almost 2% as they feared the margin, which has declined already by 19 bps to 3.15% in the reporting quarter, will get hit further if the RBI announces an easy-money policy Friday, which the market has already priced in as a given.
Most brokerages were expecting the bank to report a 64% on-year rise in net at Rs 15,075 crore and a 6% rise in net interest income at Rs 42,050 crore.
The lender had booked net profit of 9,164 crore in the year-ago period and on the sequential basis, the bottom line declined 7.9% from Rs 18,331 crore.
However, the management led by chairman CS Setty exuded confidence going forwards penciling in 14-16% advances growth and 10% more deposit collection and maintaining the margins, the net interest margin which is the money a lender makes in profit from lending after paying the depositors, at 3% if the RBI begins a rate cut season and if no rate cut then at 3.10-3.20% for the fiscal.
A repo cut will immediately impact the margins as lenders are bound to pass on the rate reduction immediately to those borrowers who have their loans priced according to the EBLR (external benchmark linked lending rate) rate, which in the case of SBI is all the retail loans including personal, auto and home loans as well MSME and agri loans, which together constitute more than 60% of its book, while 28.8% of the corporate loans are also priced at this rate.
Another reason for the spike in net income was the a 17% drop in employee expenses to Rs 16,074 crore.
The bank's net interest income rises 4.09% to Rs 41,446 crore while interest income rose 10.2% to Rs 1,17,427 crore as it sold more loans during the quarter, which overall rose 13.49% to Rs 40,67,752 crore or Rs 40.67 trillion, of which corporate book grew13.49% to Rs 11,76,303 crore and retail personal loans clipped at 14.86% to Rs 14,47,337 crore. Of this, as much as Rs 7,92,827 crore are home loans alone, which grew 14.26% and the chairman said this is the single largest portfolio of the bank.
Deposits grew past the Rs 52 trillion mark at Rs 52,29,384 crore, up 9.81% on-year.
As the asset quality continued to improve, the bank saw its loan loss provisions coming down by 31.2% to Rs 2,305 crore on year and a higher 36.52% sequentially from Rs 3,631 crore. Gross NPAs too declined to 2.07% down 35 bps and so did the net NPAs which declined by 11 bps to 0.53% or in absolute terms these numbers declined to Rs 84,360 crore down 2.75% on-year and Rs 21,378 crore down 4.6%,respectively. But on a sequential basis, net NPA ratio remained unchanged at 0.53%.
But the chairman said there is no concern on the asset quality front even from deeply troubled MFI book, as its Rs 12,000 crore exposure is to microlenders and not to their borrowers and the senior most managing director Ashwini Kumar Tiwari said none of the informed of any troubles in servicing their loans with us so far.
When asked about the corporate loan book pipeline, Tiwari said this was about Rs 4.87 trillion of which Rs 2.25 trillion have already been sanctioned.
Setty chipped in saying, given the huge income tax giveaways, he expects the private capex cycle to resume as the tax cuts will lead to a consumption boom.
Tiwari said one large corporate account worth Rs 3,700 crore had turned negative during the quarter but has been standarised now, so there is nothing to worry about the 3 bps rise in the slippages in the corporate loan book. Overall slippage ratio improved by 8 bps on-year to 0.59.
When it comes to personal loans and agri loans the asset quality has in fact improved, Setty said, adding when it comes to unsecured personal loans, there is no problem at all as their unsecured personal loans are open only to those customers who have salary accounts with the bank.