SBI net profit soars over 25% to Rs 3,879 crore as NPAs dip, advances rise

Mumbai: Beating expectations, country's largest lender State Bank of India on Friday reported 25.12 percent jump in net profit at Rs 3,879 crore for the September quarter, driven by drop in bad loans, higher non-interest income and robust loan growth.

The non-interest income jumped 35.58 percent to Rs 6,197 crore from Rs 4,571 crore, primarily boosted by a hefty Rs 485 crore repatriation of profits from its foreign operations, which on an average contributes to a fourth of the bank's business.

Similarly, its treasury income jumped multiple times to Rs 1,493 crore from a little over Rs 490 crore a year ago.

Chairperson Arundhati Bhattacharya said excluding this one-time gain by way of repatriation of profits from foreign branches, which she described as the first in the bank's history, net profit growth would have still been a healthy 15 percent.

"The Rs 485 crore has definitely helped us in reporting higher profit. Even if you take that out, we have a 15 percent rise.

"This growth is because of increase in loan book and our higher income from treasury operations which has gone up," Bhattacharya said and described the numbers as beating the market view on many counts.

Domestic net interest margins stood at 3.32 percent as against 3.49 percent, while whole bank NIM stood at 3.01 percent, up 2 basis points year-on-year.

Asset quality of the bank improved to 4.15 percent from 4.89 percent or at Rs 58,834 crore, while the net NPA stood at 2.14 percent from 2.73 percent or at Rs 28,592 crore.

"Overall, we are beginning to see the end of this entire cycle of NPAs. I am much more confident about the quality of asset going forward," the chairperson said.

She said there are one or two large accounts, which the bank is trying to work out.

"If they happen, they will happen, if they don't we may have to take those hits. But, I would like to assure you that even in those accounts the assets are very good and even if there is a hit, it will be a temporary one," she said.

Commenting on the numbers, Ravi Shenoy of Motilal Oswal Securities described the numbers as above their expectations and noted that the bank's provisioning coverage ratio has moved above 70 percent for the first time.

Giving a thumbs up to the bank, he said the brokerage has a "Buy" call on SBI.

"The over 25 percent net growth is a positive surprise as we expected only a net profit of Rs 3,290 crore that was driven partly by a Rs 490 crore forex gains. Loan growth at 4 percent was subdued, but gross NPA rise was constrained at one percent," Shenoy said.

Vaibhav Agarwal of Angel Broking, too, lapped up the numbers saying SBI's asset quality has been stabilising for the past few quarters.

SBI shares closed the day with a smart 3.86 cent gains at Rs 243.25 on the BSE which closed down 0.15 percent in a choppy trade.

In contrast to the solid SBI numbers, the second largest lender Bank of Baroda reported a spike in bad loans and provisions that pushed quarterly net profit down almost 90 percent.

But the third-largest state-run lender PNB showed some sign of stability in bad loans with a dip to 6.36 percent from 6.47 percent.

Fresh slippages in the quarter stood at Rs 5,875 crore, while the bank upgraded Rs 629 crore worth of loans and wrote off Rs 3,941 crore of loans. Recovery in the period stood at Rs 892 crore.

During the period, Rs 400 crore of bad loans were sold to asset reconstruction companies and the lender refinanced six accounts worth Rs 3,916 crore during the quarter.

In two of the accounts, which were from the steel sector, it invoked strategic debt restructuring but has not completed.

Going forward, she said having almost nailed the asset quality issues, "I think we are in a consolidation phase. We will have to take more money from the treasury side to assets side, as I am not sure about the movement of interest rates going forward.

"If the Reserve Bank cuts interest again, we will have to protect our margins and the best way to do that is to take capital out of the investments and put it into asset side. Already we will be losing close to Rs 1,000 crore for the year due to the 30 bps cut in our base rate," Bhattacharya said.

Deposits increased 10.88 percent to Rs 16,34,115 crore, while gross advances were up 10.31 percent to Rs 13,70,701 crore.

The rise in advances were helped by a healthy 21.7 percent spike in advances to large corporate. But bank's chief financial officer Anshula Kant said, this rise was not due to increased demand from companies for new projects.

"Most of this growth was driven by refinancing, while some of it came from working capital loans especially from the road sector," Kant said.

The chairperson said, we are still a way off project loans or funds for capex. "I don't see that happening in the near-term."