The nation’s largest lender, State Bank of India (SBI), posted decent results in the second quarter, with reported earnings topping street estimates by a mile. A drop of around 22% year-on-year (year-on-year) in total loan loss provisions caused a 52% jump in net profit to ₹4,574.16 million rupees, which exceeded the consensus estimate of ₹Rs 3,688.8 crore from Bloomberg analysts.
SBI’s asset quality experienced a modest improvement. Gross Non-performing Assets (NPA) fell from 5.44% in the June quarter to 5.28%, while Net NPA fell from 1.86% to 1.59% in the second quarter.
The lender said its gross NPA would have been 5.88% and net NPA 2.08% if the bank had classified loan accounts as NPA after August 31, according to Reserve Bank regulations. from India. However, the Supreme Court had ordered in its provisional order of September 3 that accounts that were not declared NPA until August 31, will not be declared NPA until new orders are issued.
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The loan portfolio grew 6.02% year-on-year compared to the previous year ₹23.83 billion. Growth was mainly driven by the retail loan segment, which grew 14.6% year-on-year, followed by agricultural and corporate loans.
Retail will be its main lever for growth, SBI management said at a post-earnings press conference. Within retail loans, the bank sees good traction in home loans, which make up 23% of its domestic loan portfolio. The average size of loan notes in the mortgage loan segment was ₹25-28 lakh, the management said. In addition, the bank is also experiencing good growth in the personal loan segment.
“In the corporate book, we see some sanctions, but when it comes to exploitation, we haven’t seen it yet. I think this is partly due to (lack of) demand. Hopefully we will see growth in the coming quarters in the corporate books, “said management.
The public sector lender expects its local loan portfolio growth to improve to 8-9% year-on-year in the coming quarters.
The improvement in the loan portfolio was welcome, but the market will follow the bank’s slippage given the cautious comments, according to analysts. SBI management spoke of larger deviations in the agricultural sector, which is contrary to what might be expected, analysts said.
Management said the new deviations were greatest in the agricultural sector, followed by small and medium-sized enterprises. However, corporate slippage has been significantly reduced.
In Q2FY21, slippage fell 69% YoY to ₹2,756 crore. However, SBI anticipates that deviations will increase in the second half of the year.
In addition, as of October, SBI had received restructuring requests amounting to ₹6,495 crore. For that, SBI has made provisions for ₹650 crore in the quarter, management said. Estimated this will increase to around ₹13 billion rupees at the end of the December quarter, led by corporate and micro, small and medium-sized business accounts.
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