MUMBAI: State Bank of India’s standalone net profit rose 134% to ₹2,610 crore for the third quarter ended December due to a lower base and a share sale in its life insurance joint venture.
Asset quality of the country’s largest lender remained stable as gross non-performing assets moved up marginally to ₹1.08 lakh crore which was 7.23% of the gross advances as compared with 7.14% at the end of September. Slippages were contained at about ₹10,000 crore during the quarter. Loan loss provisions dropped, albeit marginally, to ₹7,245 crore.
The lender’s profit was boosted by selling a part of its stake in the life insurance joint venture, SBI Life Insurance, to private equity firms for ₹1,755 crore.
“The entire amount we received from the life insurance stake sale was used for provision for standard restructured advances, where we have made higher provisioning,” Arundhati Bhattacharya, chairman, SBI said during the earnings conference call. The bank has increased its provision coverage ratio to 62.87% from 62.12% in September.
SBI managing director B. Sriram said that these extra provisions could come handy if provision requirement goes up in the coming quarters due to an ageing of non-performing assets.
The bank has seen higher overhead costs during the October-December quarter which rose 16.5% to ₹4,733 crore – one reason for this was a fourfold increase in cheque book request, Ms. Bhattacharya said.
On the other hand, demonetisation also helped the bank to open around one crore new accounts during the quarter, which is almost one lakh account per day on average, she said.
Its current and savings account (Casa) deposits also got a boost due to the note ban as its share of Casa went up by 385 bps to 46.55%. Savings account deposits showed a robust growth of 35% during the quarter.
Ms. Bhattacharya ruled out any further reduction in lending rates even as Reserve Bank of India governor Urjit Patel on February 8 said banks still have scope to cut rates.
“Since March 2015, we have reduced interest rates from 10% to 8%, which is 200 bps. RBI has reduced repo rate by 175 bps. I do not see any possibility of interest rate cut immediately,” Ms. Bhattacharya said.
SBI had reduced its marginal cost of fund based lending rate (MCLR) by 90 bps to 8% in early January as its cost of funds came down due to demonetisation.
The lender – which reported 3.03% net interest margin during the third quarter as compared with 3.05% in the previous quarter and 3.22 in the Oct-Dec quarter of last year — said there would be a further dip in margins by 5-6 bps in the fourth quarter.
The sharp lending rate cut is expected to improve loan growth only marginally as SBI expects to end the year with 6.5% credit growth – slightly higher than December figures which are at 4%, year-on-year. The bank expects 11% loan growth in the next financial year.
SBI chairman said BNP Cardiff — the French financial group which is its joint venture partner in the life insurance space — will not increase its stake from the present level which is 26%.
SBI Life Insurance which is planning for an initial public offering will start the process in the next financial year. In December, SBI Life sold 3.9% stake to private equity firms KKR & Co and Temasek Holdings of Singapore.
