SBI Dec Quarter Net Dips 4.2 pcs .; Confident of higher credit growth starting Q2 of FY22

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Mumbai: The country’s largest lender, SBI, on Thursday reported a net decline of 4.20 percent for the December consolidated quarter to Rs 6,257.55 billion, mainly driven by a higher base in the year-ago period of one-off income had benefited from 4,500 billion rupees. On an individual basis, the city-based lender’s net income was Rs 5,196.22 billion compared to Rs 5,583.36 billion for the same period last year and Rs 4,574.16 billion for the previous September quarter. Also read – SBI Clerk Recruitment 2021: Only 2 days left until the last date. Apply today for 5237 positions

Sines chairman Dinesh Kumar Khara told reporters that in the same period last year, the Essar Steel loans were canceled, resulting in over Rs.4,000 billion in interest income and an income benefit of Rs 500 billion in other income. For the quarter, core interest income rose 3.75 percent to Rs 27,779 billion on loan growth of 6.73 percent and a 0.21 percent decrease in net interest margin to 3.12 percent. Also read – SBI customer notification: Now you can transfer an account without visiting the bank branch, step-by-step instructions here

Why SBI matters

The State Bank of India controls over a fifth of the overall system and has seen healthy retail advances growth of over 15 percent. These loans now make up 61 percent of the total. According to Khara, top personal loans make up 39 percent of the book, and the bank’s stake climbs to 45 percent within a year. Also read – SBI Customer Alert: SBI Internet Banking, YONO Services, which will be affected today. Details here

He said the bank has preferences like employees and newcomers with loan customers while they make their decisions and will continue to grow this book without compromising risk. Other income increased marginally to Rs.9,246 billion for the quarter compared to Rs 9,106 billion for the same period last year.

Asset perspective

  • From an asset quality perspective, the proforma slip-ups – loans that would have to be classified as gross non-performing assets without the Supreme Court Standstill – totaled Rs.16,461 billion.
  • It received applications totaling Rs.18,125 billion in assets to be recast under a special regime introduced by the RBI.

Slip up

Khara said the total number of slips and restructurings in the nine months to December stands at Rs 41,216 billion and the bank is confident of meeting its forecast of keeping that number at Rs 60,000 billion for FY21.
From a borrowing cost standpoint, Khara said money was earmarked as a reserve for the proforma slip-ups at the same level as regular NPAs.

Rs 2,071 crore for proforma slip-ups, Rs 814 crore for restructuring applications, and Rs 3,000 crore added to bring the overall COVID-19 contingency to Rs 6,008 crore.
Total provisions and contingent liabilities were Rs.10,342 billion compared to Rs.7,252 billion in October and December 2019.

The reported gross NPA rate was 4.77 percent compared to 6.94 percent in the previous year and would still have improved to 5.44 percent without the order of the Apex court.
Khara said the corporate accounts that have requested restructuring amount to 11,000 rupees spread across the sectors.

Unlike private sector competitors who are experiencing severe stress on retail property, the focus on government employees has likely helped limit recast requests from this segment to just Rs.3,900 billion, while small businesses came in at Rs 2,500 billion.

Managing Director CS Setty said the bank is confident it will maintain asset quality in its retail book as well.

SBI Outlook

Regarding the future outlook for stress, Khara said there is minimal exposure to sectors in trouble such as textiles, hospitality, and aviation, with each accounting for around 1 percent of the book.

Khara said the bank is reviewing its FY21 credit growth target from 9 percent to 7 percent due to slow demand from the corporate segment.

The bank only favors the top-rated companies in this segment, which resulted in 2.23 percent growth in the quarter. A bank clerk said that would have been 8 percent if credit alternatives like commercial paper and non-convertible debt had been included.

It has a pipeline of over Rs 30,000 in loan proposals, Khara said, admitting that not all proposals will be converted into actual loans. Additionally, there is also a difference between drawdowns, he said, pointing out that the take-up rate in the mid-range enterprise segment is 50 percent, while it is a low 30 percent for large companies.

The bank expects credit growth to climb to double-digit levels by the second quarter of fiscal 22, Khara said.
He hoped the budget’s focus on infrastructure will drive credit demand in the future, with sectors like iron and steel, cement, and construction demanding credit.

Even with another development finance institution announced in the budget, SBI’s infra-lending will continue as in the past, he stressed.

Khara said if the budget proposal to start an asset restructuring company (ARC) or an asset monetization company to house dud assets bears fruit, the bank will no longer have to raise funds, as its corporate account provisions are above 86 percent .

A senior bank official said while the detailed guidelines have not yet been released, it is believed that accounts over 500 rupees will go to the bad bank.

The SBI chairman said the existing ARCs shouldn’t have to worry after the bad bank arrives and use the existing resolution frameworks more vigorously.

He said the bank had yet to take a call to allow more foreign ownership of its insurance subsidiaries after the budget announced it would raise the FDI cap to 74 percent.

The bank’s cost-to-income ratio rose 0.80 percent to 53.25 percent due to increased costs borne by a higher payroll, Khara said.

The total capital adequacy as of December 31 was 14.50 percent.

The bank scrip gained 5.73 percent and closed Thursday at 355.10 rupees apiece on the BSE, while it gained 0.71 percent on the benchmark.

PTI

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