SBI becomes 2nd most profitable Indian company in FY23

With most of the large companies having announced their fourth quarter and full year results for FY23, we now have a clear picture of the most profitable companies in India. Interestingly, this year State Bank of India (SBI) is the most profitable bank and the second most profitable Indian company in the Indian market. 

Pecking order of profits for FY23

Here is how the pecking order of the top Indian companies by profits looks like in FY23.

Data Source: Company filings

Here are some key takeaways from the pecking order of the most profitable companies in India.

•    The ten most profitable companies in India have generated combined profits of Rs3.57 trillion.

•    Five out of the top 10 profitable companies are from the financial sector, showing their clear dominance in the midst of rising interest spreads in the business.

•    The list also has two IT companies and ITC is the FMCG entrant into the list. Coal India is the only non-financial PSU in the list while Reliance and ITC are the only two diversified plays in the above list. The rest of them are vertically focused companies.

What brought SBI to the Number 2 slot in profits?

Let us first look at the summary of data that boosted the profits of SBI in Q4FY23 and for FY23 overall. Here are the highlights.

•    Net interest income (NII) was up 29.5% yoy for Q4FY23 at Rs40,393 crore while the NII for the full year FY23 was up 20% at Rs144,841 crore. 
•    Other income was up 17.5% yoy for Q4FY23 at Rs13,961 crore while the other income for the full year FY23 was down -9.7% at Rs36,616 crore.
•    Provisions and contingencies were down -54.2% yoy for Q4FY23 at Rs3,316 crore while the Provisions and contingencies for the full year FY23 was down 32.5% at Rs16,507 crore.
•    Net Profit was up 83.2% yoy for Q4FY23 at Rs16,695 crore while the net profit for the full year FY23 was up 58.6% at Rs50,232 crore. Please not that these are standalone numbers which will not match with our consolidated number based rankings shown earlier.
•    Gross NPAs were down -119 bps yoy for Q4FY23 and for the full fiscal year FY23 at 2.78% 
Clearly, there was a dual boost to the SBI numbers coming from better profits and improved asset quality.

How did the actual numbers stack up for SBI in Q4FY23?

For the fourth quarter ended March 2023, SBI reported 26.7% higher total revenues on consolidated basis at Rs136,852 crore. Revenue growth was 7.57% sequentially. SBI witnessed sharp growth in revenues across retail banking, corporate banking, and treasury. However, the operating profits from corporate banking fells sharply (due to default related issues) while the operating profits from retail banking and treasury were sharply higher on yoy basis. It was largely this profitable bounce in consumer banking that gave a big boost to the numbers of SBI for the fourth quarter and also for FY23. Here are the Q4 numbers.
 

Data Source: Company filings

Here are some quick takeaways that triggered record profits at SBI.

•    The Net interest income (NII) for Q4FY23 was up 29.5% you at Rs40,393 crore. This was driven by cost of deposits not keeping pace with the yield on loans.

•    As a result, the important connected ratio of net interest margins or NIMs also flattered. The net interest margins (NIM) expanded by 44 bps from 3.40% to 3.84%; although it still remains much lower than its private sector peers.

•    SBI is going tech savvy and that is evident from the alternate channel numbers. For the quarter, alternate channels were very robust with 64% of SB accounts and 35% of retail asset accounts coming via YONO app.

•    In terms of more advantages for SBI, the slippage ratio improved by 34 bps to just 0.65%. The credit cost improved by 33 bps to just 0.16% for the fourth quarter. The cost to income ratio was also lower for the quarter.
Finally, what was the outcome on the SBI profits. For Q4FY23, the operating profits were up 23.96% yoy while the net profits were up 89.5% yoy due to provisions more than halving on yoy basis in Q4FY23. These are consolidated numbers and not standalone. In terms of asset quality, the gross NPAs and Net NPAs fell sharply while the annualized ROA stood at healthy 1.23%. 

The consolidated net profit of Rs55,648 crore for FY23. This is the highest profit that SBI ever reported in any year in the past and makes SBI the second most profitable company in India. Of course, the equations may change going ahead. Firstly, the NIMs may not be so attractive as the cost of deposits also catches. Secondly, the equation could change once the merger of HDFC and HDFC Bank happens as the combined profits would be higher then. Lastly, profit leadership in the PSU segment has shifted continuously and that is always a risk that SBI runs. For now, it is time for SBI to celebrate becoming the second most profitable company in India in FY23.