The second quarter net profit of State Bank of India (SBI) has more than trebled to ₹3,012 crore for the quarter ended September 30 from the ₹945 crore recorded in the year-earlier period, mainly due to one-time gain from stake sale in its life insurance arm.
There was a gain of ₹3,484.30 crore from sale of 4.5% stake in SBI Life Insurance Company during the quarter.
Net interest income rose 17.7% to ₹24,600 crore while net interest margin improved 42 basis points (bps) to 3.22%. Non-interest income increased 28.2% to ₹12,023 crore for the quarter.
“The bank has shown all-round improvement in the performance,” said Rajnish Kumar, chairman, SBI during the post earnings media interaction.
“[The] bank’s focus has been on improving the core pre-provision operating profit. There also, the results are visible. This creates resilience to absorb any shock in the asset quality,” he said.
With slippages falling to ₹8,805 crore in Q2 compared with the ₹10,725 crore a year ago, the bank’s asset quality has improved.
Gross NPA ratio was at 7.19%, down 276 bps year-on- year and 34 bps sequentially. In absolute terms also, gross NPA has declined both on a year-on-year basis as well as sequentially. Loan loss provisions increased 8.4% to ₹11,041 crore.
Provisions
Mr. Kumar said the entire proceeds from the stake sale in the life insurance arm was used for provisions in two areas — one, stressed housing finance company (HFC) and two, in the power sector.
SBI has provided ₹900 crore for the stressed HFC, that is not an NPA.
The bank has an exposure of ₹7,000 crore towards the company. In the previous quarter, SBI had provided ₹500 crore for the same HFC.
Mr. Kumar said the provision coverage ratio of SBI is 81% and excluding advances under collection accounts, it is over 62%. Commenting that the bank had been taking measures to add ‘strength and resilience’ to the balance sheet, Mr. Kumar said, “If I call it the Safest Bank of India, I will not be exaggerating.”
“The long-term trend of the performance of the bank is in the right direction.”
Domestic credit grew 8.43% year-on-year, which was mainly driven by retail advances, where the growth was 18.9%.
While some of the private banks that have announced their earnings so far have taken a one-time hit on deferred asset tax (DTA) due to change in corporate tax rate from 35% to 25%, SBI said the bank will make the adjustment during the course of the financial year.
