State Bank of India's net profit rose 28% on year to Rs 18,331 crore for the quarter ended September, exceeding estimates of Rs 16,112 crore polled by Bloomberg. Sequentially, the bottom-line grew 7.6%.
While improvement in asset quality aided the state-owned bank's performance, slower growth in net interest income capped the rise in profit after tax.
Net interest income of the bank rose 5% on year to Rs 41,620 crore. In the year-ago period, NII grew over 12% on year.
As on Sept. 30, gross non-performing assets ratio of the bank improved to 2.13% from 2.21% a quarter ago and 2.55% a year ago. Net bad loan ratio fell to 0.53% from 0.57% a quarter ago, and 0.64% a year ago.
Provisions and contingencies rose 39 times on year to Rs 4,506 crore. This is because the company made one-off write back in the year-ago period.
While gross advances grew at a healthy pace of 15% on-year to Rs 39.20 lakh crore, deposit growth continued to lag behind that of advances at 9% on year to Rs 51.2 lakh crore.
In the post earnings conference, Chairman CS Setty said that credit growth would be 14-16% on year in the current financial year, but has curtailed its deposit growth guidance to 10-11% on year from its previous guidance of 12-13%.
Within gross advances, domestic corporate book grew the highest over 18% on-year to Rs 11.6 lakh crore, followed by retail personal loans at over 12% on year to Rs 13.96 lakh crore. Current account and savings account ratio, or CASA ratio, of the bank was on the lower side at 40.03% as on Sept. 30, against 40.70% a quarter ago.
The shift in strong growth to corporate loans from retail personal side affected the bank's interest income. Consequently, net interest margins of the bank contracted 8 basis points on quarter to 3.27%.
Overall, Setty said that the bank is not majorly worried about asset quality as corporate loan growth is showing good visibility and as it is going slower on unsecured retail.
The bank's reason to go slow on unsecured retail is not because of concerns around asset quality, but because of lower demand. SBI's unsecured book has a very good quality and Setty expects demand in this segment to bounce back because of the festive season.
Slippage ratio of the bank fell to 0.51% as on Sept. 30, lower than 0.84% a quarter ago. Credit costs also declined to 0.38% during the quarter from 0.48% in April-June.
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