SBI posts record profit in Q1 as loan loss provisions fall

State Bank of India reported a record profit for the first quarter through June 2021, helped by a sharp drop in provisions to cover potential bad loans.

The nation’s biggest lender said standalone net profitjumped 55% to Rs 6,504 crorefor the April-June period from Rs 4,189.34 crorea year earlier.

Net interest income—the difference between interest earned and paid—rose3.74% to Rs 27,638 crore even though the net interest margin for its domestic business shrank a little to 3.15% from 3.24% a year earlier.

The bank’s provisions to cover for potential non-performing assets (NPAs) slumped47% to Rs 5,030 crore from Rs 9,420 crore in the corresponding period of the last financial year.

Other key details:

1. Operating profit for Q1 grew 5.06% from a year earlier to Rs 18,975 crore.

2. Total deposits increased 8.8% year-on-year but gross advances grew at a slower pace of 5.8%.

3. Retail personal loans recorded the fastest growth, of 16.5%, while corporate loans fell 2.33%.

4. The bank’s capital adequacy ratio improved by 26 basis points to 13.66%.

5. Asset quality slightly improved as gross NPA ratio was at 5.32% from 5.44% a year earlier.

Management commentary:

SBI said itsdigital strategy is on track as it opened 38% of retail asset accounts and 72% of savings accounts through its Yono app in the first quarter.

The bank recorded strong growth in personal retail loans, driven by home loans, credit and gold loans. It added the growth in corporate loans will revive in line with recovery in the investment cycle in the broader economy.

The state-run lender also said it has well provided for its stressed book with its provision coverage ratio at 85.93% as of June 30, 2021.

It acknowledged that the Covid-19 pandemic across the globe has resulted in a decline in economicactivities and that the situation remains uncertain.It said that major challenges for the bank could be fromextended working capital cycles, fluctuating cash flow trends and probable inability of theborrowers to repay their loans timely.

However, the bank is proactivelyproviding against the challenges of likely stress on its assets, SBI said.