State Bank of India’s (SBI) standalone net profit rose 55% year-on-year (y-o-y) to Rs 6,504 crore in Q1FY22 on the back of a 48% jump in non-interest income. However, the bank reported a deterioration in asset quality across segments of retail credit as collections were hit by the second wave of Covid-19.
In the June quarter, slippages fell 29% sequentially to Rs 15,666 crore. Of the total slippages, Rs 6,416 crore came from the small and medium enterprises (SME) segment and Rs 5,268 crore from retail. The ratio of gross non-performing assets (NPAs) in the retail segment was 1.28%. The bank reported an NPA ratio of 2.24% in its gold loan book and 1.39% in its home loan book.
Half of SBI’s home loans are to the non-salaried segment and some of them are linked to SME borrowers, said Dinesh Khara, chairman, SBI. He attributed the high NPA ratio in gold loans to the inability of collection staff to reach borrowers amid mobility restrictions.
Khara said after the second wave receded, the bank has seen a decent pullback in home loans and the other retail segments. “The SME sector is a little more sticky and we are seeing better traction for debt restructuring from this sector,” Khara said, adding that of the Rs 7,300 crore of recast requests, about Rs 1,400 crore has come from the SME sector. Recasts for SME accounts worth Rs 1,100 crore have been carried out.
“Going forward, the lockdowns are absent and revival of economic activity is being seen and these are some of the positives. The slippages came under unusual circumstances on account of lockdowns and once economic activity comes back, slippages would also be in a position to be pulled back,” Khara said.
SBI has seen a pullback of about Rs 4,700 crore of slippages in the last one and half months, he added. The bank’s overall asset quality suffered, with the gross NPA ratio rising 34 bps sequentially to 5.32% and the net NPA ratio rising 27 bps to 1.77%.
SBI’s net interest income (NII), or the difference between interest earned and expended, rose 3.7% y-o-y to Rs 27,638 crore. The domestic net interest margin (NIM) rose 4 basis points (bps) sequentially to 3.15%. Khara said as credit offtake improves, the bank expects an improvement in NIMs. He guided for a credit growth of around 9% in FY22.
The bank’s gross advances grew 5.8% y-o-y to Rs 25.23 lakh crore as on June 30, 2021. Retail loans grew 16.5% y-o-y, while the corporate loan book shrank 2.33%. The chairman added that SBI has seen an improvement in utilisations in the mid-corporate segment in FY22. “We are seeing that in certain sectors like iron and steel, there is an improvement in activities. We saw an under-utilisation of about 30% last time when we met, but this time in the commercial client group, it is 25%, a slight improvement,” he said.
SBI will remain focused on the home loan market and it sees no reason to reorient its strategy there. “When it comes to home loans, the market potential is huge and there is no reason for us to slow down. We have mastered how to ensure right appraisals and timely distribution and would like to continue doing well,” Khara said.
Deposits grew 8.8% y-o-y to Rs 37.21 lakh crore as on June 30, with the current account savings account (CASA) ratio up 63 bps y-o-y to 45.97%.
SBI’s shares ended 2.37% higher than their previous close on the BSE at Rs 457.05 on Wednesday.