Exceeding estimates, State Bank of India -- the country’s largest lender -- reported a 27.92 per cent increase in net profit year-on-year for the July-September 2024 quarter, driven by a sharp rise in non-interest income, including treasury and foreign exchange earnings.
The net profit reached Rs 18,331 crore in Q2FY25, up from Rs 14,330 crore in the same quarter last year. This was higher than Bloomberg’s consensus estimate of Rs 16,000 crore in net earnings. Sequentially, the profit increased 7.61 per cent from Rs 17,035 crore.
Despite this, SBI’s share price declined 1.86 per cent to Rs 843.25 apiece on Friday as the lender posted a sharp rise in loan-loss provisions.
The bank also said it had been “endeavouring” towards 12-13 per cent deposit growth but “will probably not be able to reach that by FY25”.
SBI Chairman C S Setty, who took the helm in August, said the bank aims to be India’s first company to achieve Rs 1 trillion in net profit, though the immediate goal is Rs 1 trillion in operating profit. “We are almost there,” he stated.
The bank posted Rs 93,797 crore in operating profit and Rs 61,076 crore in net profit in FY24; the timeline for hitting the Rs 1 trillion net profit target remains under consideration.
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SBI’s net interest income (NII) — the difference between interest earned and expended — grew 5.37 per cent year-on-year to Rs 41,620 crore. But it rose just 1.2 per cent from Rs 41,125 crore in Q1FY25.
The cost of deposits for domestic operations increased to 5.03 per cent in Q2FY25, up from 4.65 per cent in Q2 FY24 and 5 per cent in Q1FY25. Meanwhile, yield on advances edged up to 8.87 per cent from 8.86 per cent a year ago and 8.83 per cent a quarter ago.
However, net interest margin (NIM) from domestic operations declined by 16 basis points year-on-year to 3.27 per cent. “NIM compression has been contained,” Setty noted, adding, “the interest rates on deposits have peaked. The yield on advances will improve as the bank has increased the MCLR rates.”
Other income surged 41.52 per cent to Rs 15,527 crore in Q2FY25, bolstered by a 129.62 per cent jump in treasury gains to Rs 4,641 crore, while foreign exchange income climbed to Rs 1,111 crore from Rs 298 crore last year.
Total gross advances grew by 14.93 per cent year-on-year to Rs 39.2 trillion, with retail loans rising 12.3 per cent to Rs 13.96 trillion. Home loans saw a 13.66 per cent growth to Rs 7.64 trillion. “There had been an uptick in retail loans in October, coinciding with festivals,” Setty said.
Corporate advances grew by 18.35 per cent year-on-year, while agricultural lending rose 17.67 per cent. The bank anticipates 14-16 per cent loan growth for FY25, supported by a corporate pipeline worth about Rs 6 trillion.
Addressing questions on lending to the airline sector a day after the Supreme Court ordered liquidation of grounded carrier Jet Airways, to which SBI was a major lender, Setty commented: “Not many airlines left now to be funded. We have funded airlines based on ownership and not necessarily on the basis of operational parameters. Although they are important from a credit underwriting point of view. I don’t think we will be taking any big bets on the airline industry going forward.”
Deposits expanded 9.13 per cent year-on-year to Rs 51.17 trillion, of which current and savings accounts (CASA) deposits rose 4.24 per cent. However, the CASA ratio dipped to 40.03 per cent as of September 2024, down from 41.88 per cent a year earlier and 40.70 per cent in the previous quarter.
SBI is aiming for a 10-11 per cent deposit growth rate, though Setty acknowledged that the bank’s green deposit initiatives are still nascent. “Guidance holds for double-digit (deposit) growth. We are endeavouring towards 12 per cent-13 per cent but will probably not be able to reach that by FY25. The effort is to have at least 10%-11 per cent deposit growth,” he said.
He also confirmed board approval for raising an additional Rs 20,000 crore via infrastructure bonds.
On liquidity, the SBI chairman said the bank’s liquidity coverage ratio (LCR) stood at 129 per cent at the end of September 2024, comfortably above its internal minimum of 120 per cent.
Provisions for loan losses almost doubled year-on-year to Rs 3,631 crore in Q2FY25, primarily due to regulatory requirements for ageing stressed assets. Nonetheless, asset quality remains strong, with the gross non-performing assets (NPA) ratio down by 42 basis points year-on-year to 2.13 per cent, and the net NPA ratio down by 11 basis points to 0.53 per cent. The provision coverage ratio (PCR), including written-off accounts, was 92.21 per cent, slightly up from 91.93 per cent a year ago.
Fresh slippages for the quarter were Rs 4,871 crore, up from ₹3,831 crore in the same period last year but down from Rs 7,903 crore in Q1FY25.
SBI’s capital adequacy ratio stood at 13.76 per cent as of September 2024, a year-on-year decrease of 52 basis points. The common equity tier-1 (CET1) ratio was 9.95 per cent.
Setty noted that factoring in the first-half profits would push the capital adequacy ratio above 14 per cent, sufficient to support additional credit of Rs 6 trillion. SBI has no immediate plans to raise additional equity capital.