The country’s largest lender, State Bank of India (SBI), took a significant hit on its treasury book due to a spike in bond yields in March, causing it to miss Street estimates on key financial metrics.
The bank on Friday reported a 5.6% year-on-year rise in standalone net profit at Rs 19,684 crore for the March quarter, lower than analysts’ estimate of Rs 20,312 crore. For the full year, SBI posted its highest-ever standalone net profit of Rs 80,032 crore, up 13%.
The management, led by chairman CS Setty, attributed the sharp fall in treasury income to the surge in bond yields in March following market volatility triggered by the Iran war. Treasury income plunged to Rs 1,259 crore from Rs 8,991 crore a year earlier.
Setty clarified that the impact from squaring off a $5-billion net open forex position following a Reserve Bank directive was negligible, resulting in only around Rs 100 crore of notional losses, of which Rs 57 crore was booked during the reporting quarter.
The sharp decline in treasury income also dragged down other income by 29% to Rs 17,314 crore from Rs 24,367 crore a year ago. SBI’s bond holdings under the mandatory SLR portfolio exceed Rs 17 lakh crore, around Rs 3 lakh crore higher than the stipulated 18% requirement.
The weaker-than-expected quarterly performance led SBI shares to plunge 7.42% intraday on Friday before closing 6.4% lower.
Setty said the bank’s total income declined to Rs 1,40,412 crore from Rs 1,43,876 crore a year ago, while net interest income rose 4.1% to Rs 44,380 crore. Interest income increased to Rs 1,23,098 crore from Rs 1,19,666 crore.
On a consolidated basis, net profit rose marginally to Rs 19,643 crore from Rs 19,600 crore, while total income increased to Rs 1,81,079 crore from Rs 1,79,562 crore.
The bank declared a dividend of Rs 17.35 per share, with May 16 fixed as the record date and payout scheduled for June 4.
Margins also came under pressure during the quarter, with overall net interest margin (NIM) declining to 2.81%. Domestic NIM came in at 3.03%, down from 3.14% a year ago. However, the chairman said the bank remains hopeful of maintaining margins above 3% in the current fiscal.
Asset quality improved further during the quarter. Gross NPAs declined to 1.49% from 1.82%, while net NPAs fell to 0.39% from 0.47%. In absolute terms, gross NPAs reduced to Rs 73,452.5 crore from Rs 76,880 crore, while net NPAs declined to Rs 18,830 crore from Rs 19,667 crore.
