SBI Q1 Results: Operating Profit, Other Income Aid Bottom Line; Asset Quality Stable

Strong operating performance, uptick in other income and loan growth helped State Bank of India to post a 13% jump in standalone net profit, beating analysts' estimates.

The public sector lender posted a profit of Rs 19,160 crore in the June quarter as compared to Rs 17,035 crore in the year-ago period, according to an exchange filing on Friday. Analysts tracked by Bloomberg had a consensus estimate of Rs 16,964 crore.

Operating profit of SBI rose 16% year-on-year to Rs 30,544 crore and other income jumped 54% to Rs 17,345 crore. However, rise in provisions and tepid profitability capped the gains. Loan-loss provisions of the lender rose over 9% to Rs 4,934 crore.

Net interest income of the bank was largely flat on year at Rs 41,072 crore, as compared to analysts' estimate of Rs 42,430 crore. Sequentially, the NII fell 4%. Consequently, the net interest margin also declined to 3.02% as against 3.15% a quarter ago.

The bank's NIM trajectory will be a 'U-shaped' one, with some dip in the second and third quarter but a bounce back in the fourth quarter, Chairperson CS Setty told reporters at the post-earnings conference. He expects the NIM in Q4 to remain the same as that of the last year at 3.15%.

When asked if he expects NIM to fall below 3%, Setty said that the guidance on NIM will remain at 3% on an annualised basis.

Asset quality of the public sector bank was stable, with gross non-performing assets ratio slightly rising to 1.83% as of June end from 1.82% in January-March. Setty expects the bank's GNPA ratio to remain below 2% through cycles. Net NPA ratio remained flat QoQ at 0.47%.

Slippage ratio of the bank was at 0.75% as of June end as against 0.42% a quarter ago. Credit cost of the bank was at 0.47%, higher than 0.39% a quarter ago.

SBI's deposits rose 11.66% on year to Rs 54.73 lakh crore. Current account and savings account ratio of the bank came at 39.36% at the end of June as against 39.97% a quarter ago.

The bank's loan book remained strong, with gross advances rising 11% on year to Rs 42.5 lakh crore. Within this, the domestic corporate loan book rose 5.7% on year at Rs 12.03 lakh crore.

Speaking about slowdown in its corporate book, Setty said the growth looks muted because corporates shifted towards market instruments and as working capital utilisation has come down.

Additionally, most corporates have been tapping the commercial papers market for their funding needs amid overall deleveraging of balance sheets.

However, Setty expects corporate loan growth to come back in double digits in the current financial year by touching 10% in the December quarter, if not September quarter.

This optimism has come as Setty believes once rates stabilised on banking side, corporates will come back

"We have robust visibility on sanctions which are yet to be disbursed. We have a corporate loan sanction pipeline worth Rs 7,000 crore," he said.

When asked about the impact on corporate lending from US tariffs, Setty said that the banking sector doesn't have much exposure to those sectors.

While there is direct exposure to four-five sectors within small and medium enterprises, the impact is limited in the overall scheme of things.

However, the uncertainty emanating from tariffs may impact corporate investments, he said, adding that it was more damaging. India’s basket of exports and geographies are both broad-based, he said.

He expects demand coming from project financing as there is no large project finance demand in the bond market. Overall, the bank remains focused on sectors such as renewables, roads, highways, data centres and even refineries.

Based on this optimism, Setty expects the bank's overall loan book to grow at 12% in the current financial year and deposits at 10%.

Domestic retail personal loan book increased 12.6% to Rs 15.4 lakh crore. Of which, home loans grew 15% on year to Rs 8.5 lakh crore.

He said that the bank doesn't see stress in its retail loan book and that its SME book has been doing well and will continue to grow. The bank's SME loan book grew 19% on year to Rs 5.28 lakh crore.