SBI posts net profit of Rs 838 crore in Q4 on higher interest income

Depicting a sturdy financial profile, the country’s largest bank — the State Bank of India — posted a net profit of Rs 838 crore in the fourth quarter of 2019 (Q4FY19) on higher interest income and sharp drop in provisions for bad loans.

SBI had posted a loss of Rs 7,718 crore in the fourth quarter of FY18.

While the bank came back into profit in Q4 of FY19, sequentially, its net profit fell to Rs 838 crore from Rs 3,955 crore in Q3 FY19.

Net interest income grew by 15 per cent to Rs 22,954 crore in Q4 FY19. The domestic net interest margin (NIM) also improved by 20 basis points to 3.02 per cent. The non-interest income, comprising fees, commissions and sale of investments showed a mere 1.5 per cent growth at Rs 12,685 crore. For FY19, the bank posted a net profit of Rs 862 crore against a loss of Rs 6,547 crore in FY18.

SBI Chairman Rajnish Kumar had said, “FY19 will be the year of hope. We have lived on that expectation and delivered excellent performance on all parameters. The turnaround has happened.”

Its asset quality profile improved substantially with gross non-performing assets declining to 7.53 per cent in March 2019 from 10.91 per cent in March 2018. Provision coverage ratio for bad loans increased substantially to 78.73 per cent in March 2019 from 66.17 per cent in the previous year. This covers the amounts set aside for written-off loans.

The improvement in asset quality is quite visible. Gross NPAs and net NPAs are substantially down. The provision coverage ratio is about 79 per cent in March 2019. This shows that balance sheet of the bank has been fully repaired, SBI’s chairman said.

It is treating loans to jet as NPAs and has made provisions for them.

“Going forward, the impact of the shadow of the past will not be on the earnings of the bank. The costs, including for human resource, are under control. This is a broad picture where we are very close to the ‘state of equilibrium’ where the growth (credit) should be around 12 per cent in FY20. The credit costs for fresh slippages will remain below one per cent,” he said.

"As for return on assets (RoAs), we have set a target of one per cent for March 2021. But I am optimistic that we would be able to advance it to FY20. We have set the vision, are on course and there is no looking back hereafter," he added.

About the bank’s strategy on lending, he said the loan book of SBI and that of any other bank are not comparable. The retail segment, comprising personal and household, agriculture and SMEs, has 58 per cent share in total loans while corporate loans account for 42 per cent. Since NBFCs are facing challenges, there is huge opportunity in retail for the bank.

Total advances rose by 12 per cent to Rs 22.93 trillion at the end of March 2019. Of this, domestic retail (household and personal credit) book rose by 18.5 per cent to Rs 6.47 trillion.

The corporate loan book grew by 15 per cent to Rs 8.51 trillion. For many, the bank’s appetite for corporate credit is limited. This will also create an opportunity for SBI.

“We have never been in a sweet spot like this so far as competition is concerned. We have everything with us today – the capability to underwrite and monitor loans, have capital, funding and liquidity,” he added.

There will not be much of a change in the portfolio mix (retail and corporate) of the bank. So far as corporate credit is concerned, risk weighted assets have not grown significantly.

There will be growth in the corporate loan book but focus will be on quality. “We will not miss an opportunity to expand because we have the ability to grow and manage risk,” Kumar added.

The bank’s deposits grew 7.6 per cent to Rs 29.11 trillion and share of the current and savings deposits rose by just six basis points to 45.74 per cent.

Capital adequacy ratio stood at 12.72 per cent out of which common equity tier I was 9.62 per cent.