India's largest lender reported operationally weak numbers for the April-June quarter, even though it reported its highest ever quarterly profit one more time.
Net profit for the quarter rose 178% year-on-year to Rs 16,884 crore. The reading was 12.7% higher than the Rs 14,945 crore profit estimated by analysts polled by Bloomberg.
On the face of it, a 25% rise in net interest income and a fivefold surge in other income boosted profitability. But that did not impress the markets much. SBI shares closed at Rs 573.25 a piece on Friday, down nearly 3% from their previous close.
"Q1 is always a unique quarter... Invariably, in the last quarter (Q4), we have sufficient earnings, and various one-offs are getting recorded," Chairman Dinesh Khara explained to reporters on Friday.
The reasons for the disappointment include SBI's asset quality figures and slower-than-expected loan growth.
Fresh slippages for the quarter were Rs 7,659 crore, more than double the Rs 3,185 crore reported a quarter ago. The majority of these came from personal loans, small and medium enterprise borrowers, and agriculture loans.
"Fact of the matter is, there might be some deterioration at the end of the quarter, but the recoveries keep happening every day," Khara said.
Even when it comes to loans in default that are yet to be classified as NPAs, SBI saw its performance worsen during the first quarter.
Among individual loans worth over Rs 5 crore each, borrowing under the special mention account category rose to Rs 7,221 crore in the first quarter, compared with Rs 3,260 crore as of March 31.
According to Khara, over Rs 5,700 crore worth of special mention accounts had already been recovered at the end of July. As far as corporate borrowers are concerned, SBI does not see any major asset quality concerns, he added.
Loan Growth Concerns
SBI's global loan book rose nearly 14% year-on-year to Rs 33 lakh crore. In its domestic loan book, which accounts for Rs 28.2 lakh crore of the current total, the growth was around 15% from last year.
On a quarter-on-quarter basis, though, the book rose by a mere 1.5%, indicating a seven-quarter low growth rate, analysts pointed out.
The softer loan growth also resulted in net interest income being lower at Rs 38,905 crore, compared to market estimates of over Rs 40,000 crore.
The bank expects overall credit growth to remain between 14 and 16% as it sits on an impressive Rs 3.5 lakh crore pipeline of corporate loans. Retail growth, too, will continue at the current rate of over 16%.
"We will take up opportunities in the corporate loan book, if there are any, as long as it meets our risk appetite," the SBI chairman said.
The bank's performance on the liabilities front remains strong, with deposits rising 12% year-on-year to over Rs 45 lakh crore.
The lender will watch out for competition arising out of the July 1 merger of HDFC Bank Ltd. with its parent, Housing Development Finance Corp. As the private bank will now seek to replace HDFC's market borrowings with customer deposits, competition will "get quite heated", Khara told BQ Prime in an interview after the results announcement.
Domestic net interest margin dipped 37 basis points sequentially to 3.47%. The bank expects to hold margin at this level, he added.
In an earlier interview with BQ Prime, Khara had termed the calendar year 2023 the year of hope. When asked on Friday if he continues to hold that view, he said, "We are more realistic of the hope getting realised now."
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