SBI Q3 Results: Net Profit Falls 7% But Beats Estimates

State Bank of India's third-quarter profit fell on higher provisions. Yet, the earnings beat estimates.

Net profit of India's largest lender declined 7% year-on-year to Rs 5,196 crore in the quarter ended December, according to an exchange filing. That compares with the Rs 4,479-crore consensus estimate of analysts tracked by Bloomberg.

The bank in the quarter ended December 2019 had reported its highest-ever quarterly profit, aided by Rs 11,000-crore worth recoveries from Essar Steel Ltd.'s resolution under the Insolvency & Bankruptcy Code.

• Net interest income rose 4% over the year-earlier to Rs 28,820 crore. Analysts pegged the bank's core income at Rs 28,400 crore.

• Other income stood at Rs 9,246 crore in the third quarter compared with Rs 9,016 crore a year ago.

Asset Quality & Provisions

SBI's gross non-performing asset ratio stood at 4.77% compared with 5.28% in the preceding three months. Its net NPA ratio was at 1.23%, down 36 basis points sequentially.

The bank followed the Supreme Court's interim order in the interest-on-interest case for the second straight quarter. If the interim order wasn't in place, the bank's gross NPA ratio would have been at 5.44% in the third quarter compared with 5.88% in the July-September period.

SBI, during the October-December quarter, reported slippages worth Rs 2,073 crore, which were not classified as NPA owing to the Supreme Court's order. As on Dec. 31, loans worth Rs 16,461 crore carried the asset classification dispensation given by the apex court. SBI said it holds Rs 5,265 crore worth provisions against these accounts.

As on Dec. 31, the state-owned lender received restructuring requests worth Rs 18,125 crore, it said. This includes loans worth Rs 3,865 crore from retail customers, Rs 2,553 crore from small and medium enterprises and Rs 11,707 crore from corporate customers.

Total provisions for the lender stood at Rs 10,324 crore, up 43% year-on-year. Of this, provisions against bad loans stood at Rs 2,290 crore compared with Rs 8,193 crore a year ago. During the reported quarter, the bank has accounted for Rs 2,682-crore charge emerging from the 11th bipartite wage settlement, it said.

“Our provision coverage ratio is more than 90% so we do not expect any large provisions to be made against these assets in the future,” said Dinesh Kumar Khara, chairman at SBI.

The bank aims to control its credit costs this year, well below the 2% guidance it had given previously. Total stressed assets, which is slippages added with restructured accounts, will remain below Rs 60,000 crore this year, Khara said, adding it was Rs 41,000 crore as on Dec. 31.

Deposits & Advances

SBI's total deposits rose 13.64% year-on-year to Rs 35.35 lakh crore, while total advances rose 6.73% to Rs 24.56 lakh crore.

• Low cost current account savings account deposits rose 15.33% year-on-year.

• Retail advances rose 15.47% from a year ago to Rs 8.31 lakh crore, while corporate advances showed a 2.23% growth.

• Home loans rose 10% year-on-year, while auto loans increased 3.37%.

• Outstanding loans in the bank's quick personal loan product XPress Credit rose 36% year-on-year to Rs 1.77 lakh crore.

“We are seeing some recoveries in sectors like textiles, aviation and airports, hotels and tourism. We are confident that once we reach near-normal, we should start seeing demand from corporate borrowers,” said Khara.

Speaking about the government's proposed infrastructure spend in the coming quarters, Khara said this should help the bank extend more credit lines to corporate borrowers as the demand situation in the economy improves. “We are aiming about 7% credit growth for this financial year. We expect double-digit growth by the second quarter next financial year.”

Shares of SBI closed 5.73% higher, after the results were announced compared with a 0.71% gain in the Nifty 50.