Asset quality improves; gross NPA ratio crashes to 3.52% from 4.9%, while net NPAs almost halved to 0.8% of advances from 1.52%

Asset quality improves; gross NPA ratio crashes to 3.52% from 4.9%, while net NPAs almost halved to 0.8% of advances from 1.52%

State Bank of India on Saturday reported the highest-ever quarterly profit at ₹13,265 crore, reflecting an increase of 74% for the quarter ended September, spurred by robust loan sales, higher interest income and lower provisions.

Total income increased to ₹88,734 crore during the quarter under review from ₹77,689.09 crore a year earlier. Net interest income rose 13% to ₹35,183 crore.

Of the total income, more than one-fourth, or ₹24,400 crore, came from investment gains, though the bank has not booked profit from government securities in which it holds an additional exposure of more than ₹3.85 lakh crore, chairman Dinesh Kumar Khara told reporters during the earnings conference at the bank’s headquarters.

As the bank nearly passed on the entire rate by the central bank to borrowers as well as depositors, its domestic net interest margin improved to 3.55% from 3.5%.

The asset quality of the bank improved with the gross non-performing asset (NPAs) ratio crashing by 138 basis points (bps) to 3.52% from 4.9%, while net NPAs nearly halved to 0.8% of the advances from 1.52%.

As a result, provisions for bad loans declined to ₹2,011 crore from ₹2,699 crore, the Chairman said.

In absolute terms, gross NPAs declined by 13.8% to ₹1,06,804 crore and net NPAs by 36.5% to ₹23,572 crore.

While the bank earned an interest income of ₹79,860 crore, up 15%, interest expenses rose 16.6% to ₹44,676 crore. Of the total income, the key net interest income rose 12.8% to ₹35,183 crore as its NIM (Net Interest Margin) improved by 5 bps to 3.55%.

Forecasting a marginally lower credit growth for the rest of the fiscal at 14-16 per cent, down from 20% in the reporting quarter led by the corporate books, Mr. Khare said, “now that we’ve also got treasury excess investment of (₹3.85 lakh crore) which we haven’t booked in this quarter, but expect to unwind in the course of the year, we’re confident of supporting higher credit growth.”

He also said keeping too much capital idle is not the right way of fund utilisation and that he is comfortable with an under-10% core capital for the bank, which stood at 9.53%, down 23 bps.

Explaining the reason for the record loan sales, the chairman said the second quarter was a busy season, “that is why we had a strong credit growth. But I still expect going by the current trend, we should have credit growth of 14-16% in the current financial year. Our corporate book has a loan pipeline of ₹2.4 lakh crore of which ₹1.27 lakh are pending for disbursals”.

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By Dipak

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