State Bank of India (SBI) on Friday reported an 81% increase in quarterly profit on higher interest income and a stake sale in its insurance unit but warned that loan growth will moderate because of the pandemic.
Net profit rose to ₹4,189.3 crore in the quarter to June from ₹2,312 crore a year ago. Profit was boosted by a one-time gain of ₹1,539.73 crore from a stake sale in SBI Life Insurance Co. Ltd. A survey of 15 analysts had pegged the bank’s profit at ₹3,375 crore.
Net interest income (NII), or the difference between interest earned and expended, rose 16% to ₹26,641.5 crore.
The muted loan growth forecast by India’s largest bank, although the government and the central bank are making efforts to boost credit supply, underlines the stress among firms and individuals because of a protracted covid lockdown.
“For the current year, we have moderated our loan growth target to 8%. Earlier, we were planning or budgeting for more than 10%. It may so happen that we may exceed 8%,” chairman Rajnish Kumar told reporters after the earnings announcement.
Kumar said the bank does not expect asset quality to deteriorate significantly once the loan repayment moratorium ends on 31 August.
“There is a very good reason for the bank to believe that from September there may not be an issue with regard to recovery of these loans (under moratorium),” he said. “I had made my views clear that after 31 August, the moratorium is not required. That is also the view of most bankers.”
Kumar said 9.5% of the bank’s loan book is under moratorium as of 30 June. “The bank has an outstanding term loan book of ₹16 trillion and 90.5% of this book is where two or more installments have been paid,” said Kumar.
According to Kumar, most corporates, mainly those rated “AA” and “AAA”, are in a position to service loans from September.
While SBI’s total provisions rose 36% to ₹12,501 crore in the June quarter, its other income was little changed at ₹7,957 crore in the same period. SBI said that during the quarter, it had made an additional provision of ₹1,836 crore for covid-19 and its total provisions for the pandemic as on 30 June were at ₹3,008 crore.
SBI’s net interest margin, a key measure of profitability, improved 30 basis points to 3.24% in the June quarter from the preceding three months.
