SBI Q1 net drops 6.7 pc to Rs 6,068 cr on MTM losses

Mumbai: The country’s largest lender State Bank of India (SBI) on Saturday reported a 6.70 per cent drop in its standalone profit after tax at Rs 6,068 crore for the quarter ended June on account of mark-to-market (MTM) losses.

The lender had reported a profit after tax (PAT) of Rs 6,504 crore on a standalone basis in the April-June quarter of fiscal 2022.

On a consolidated basis, its PAT stood at Rs 7,325.11 crore as against Rs 7,379.91 crore in the same quarter of the previous fiscal.

SBI Chairman Dinesh Khara said during the quarter the bank has delivered reasonable outcomes in business, profitability and asset quality.

“While net profit and operating profit have been impacted by the MTM losses due to hardening of the bond yields, our core revenue streams have remained intact with good growth over previous year,” Khara told reporters.

The lender took a hit on account of MTM losses amounting to Rs 6,549 crore on its investment book, which had an adverse impact on the Return on Assets (RoA) and Return on Equity (RoE), which were down 9 basis points (bps) and 203 bps, respectively.

Mark-to-market (MTM) losses occur when the financial assets held are valued at current market value which is lower than the price they were purchased at.

Khara said as the government securities (g-sec) yields soften, the bank will be able to recover most of the MTM losses during this year.

“We have done some kind of sensitivity analysis. If we go by the government securities yield of 7.30 per cent, which was yesterday’s closing, we can write back Rs 1,900 crore of MTM provision, which we have already created,” he said.

Net Interest Income (NII) increased by 12.87 percent to Rs 31,196 crore from Rs 27,638 crore.

Domestic net interest margins (NIM) improved by 8 bps to 3.23 percent from 3.15 per cent.

Asset quality also improved, with gross non-performing asset (GNPA) at 3.91 percent as against 5.32 percent in the same quarter of the previous year. Net NPA stood at 1 per cent compared to 1.77 percent.

In terms of asset quality, the lender does not see any challenge going ahead, Khara said.

“There is hardly any challenge in the corporate book. Even in the retail book, we are having NPA which is well within control. SME is one area where we have some NPAs but part of it is coming from the restructured book and we have adequately provided for it,” he said.

Fresh slippages in the quarter were at Rs 9,740 crore, of which the lender has already pulled back almost Rs 2,800 crore.

Slippage ratio was down 109 bps to 1.38 per cent and credit cost stood at 0.61 percent, down 18 bps.

Recoveries and upgradation in the quarter stood at Rs 5,208 crore.

Loan loss provisions were down 15.14 per cent to Rs 4,268 crore from Rs 5,030 crore in Q1 of FY2022. Its capital adequacy ratio (CAR) was at 13.43 per cent.

Khara further said the bank is well capitalised and its internal accruals will be enough to take care of business growth in the current year.

Its advances grew at 14.93 percent and deposits at 8.73 percent. Credit growth of the bank is expected to be at 15 per cent in the current financial year.

“We have got decent visibility for credit growth to happen. Even the capacity utilisation has come to 75 per cent in the economy and apart from that we have got a situation where we expect more corporates will be looking at us for availing credit facilities as compared to options available in the past for raising funds from the securities market,” Khara said.

He added that the retail segment continues to do very well and the bank has got a decent visibility of mortgages, express credit and other loans.

Speaking on SBI’s stake in Yes Bank, Khara said, “We are required to keep stake at 26 per cent (till March 2023) and we will go by what is expected of us. This matter has not been deliberated at the board level (so far).