SBI Q1 profit surges on lower provisioning

India’s largest state-owned lender, the State Bank of India (SBI) outperformed local benchmark indices by continuing to trade higher as investors cheered strong quarterly performance for the fiscal first quarter.
The lender reported a standalone profit of Rs 4,189.34 crore for the quarter ended June 2020, a growth of 81.2% over a year-ago period driven by stake sale in life insurance business.
Provisions and lower non-interest income limited growth in profit.

Net interest income, the difference between interest earned and interest expended, increased 16.1% to Rs 26,641.56 crore in June quarter compared to Rs 22,938.8 crore in year-ago period.
In June this year, SBI sold 2.1% equity stake in SBI Life Insurance Company via offer for sale route to comply with shareholding norms and raised Rs 1,539.73 crore.

Asset quality improved significantly in the quarter ended June 2020, with gross non-performing assets (NPA) as a percentage of gross advances falling 71 bps QoQ to 5.44% and net NPA declining 37 bps QoQ to 1.86%.
Moratorium-2 Book came from 25% of loans to 9.5% of loans. These are the accounts where borrowers have paid less than two monthly installments since March. Most accounts under moratorium belong to corporate borrowers and the bank expects them to start paying normally from September.

SBI’s bad loan provisions fell 19% on-year to Rs 9,420 crore. Provisions against non-performing assets in the quarter ended March stood at Rs 11,894 crore. This comes when most banks are raising provisions to safeguard their balance sheets against the Covid-19 pandemic—which froze economic activity—and risk of defaults after the loan moratorium ends on August 31.

In the quarter ended June, the bank recorded fresh slippages worth Rs 3,637 crore, lower than Rs 8,105-crore-worth slippages reported during January-March and Rs 16,212 crore a year ago. Recoveries and upgrades during the first quarter stood at Rs 4,056 crore.

SBI’s outstanding advances rose 6.58% year-on-year to Rs 23.85 lakh crore as on June 30. Deposits rose 16% from a year ago to Rs 34.2 lakh crore. The growth in advances was mainly aided by retail advances and foreign office advances, which rose 12.85% and 11.19% year-on-year, respectively.

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