For the current financial year, SBI has ₹32,000 crore of loans under its watch list

State Bank of India’s net profit rose 123% to ₹2,815 crore for the quarter ended March driven by a healthy growth in net interest income and a lower base.

The country’s largest lender posted a net profit of ₹1,264 crore in January-March period of the fiscal 2015-16 — a quarter in which most banks were hit due to Reserve Bank of India’s asset quality review.

‘Difficult quarter’

“We have just been through a very difficult but satisfying quarter,” said Arundhati Bhattacharya, chairman, SBI at the post-earnings press conference stating that this was last earnings of the bank on a solo basis.

SBI has merged five of its associate banks and Bhartiya Mahila Bank from April 1, 2017, and has become second largest lender globally in terms of footprint, she said.

The lender was able to contain fresh slippages of ₹9,755 crore during the quarter, lower than both the previous quarter as well as in the year-ago period.

Fresh slippages were more than ₹30,000 crore during the fourth quarter of 2015-16.

“The watch list was 2.3% of our corporate loan book at the start of the previous financial year.

“This year it is 1.6% despite merger of the associate banks,” Ms. Bhattacharya said when asked if she expects asset quality to improve.

Credit cost

For the current financial year, SBI has ₹32,000 crore of loans under its watch list. However, she said credit cost, which was 2.14% in FY17, could remain elevated in the coming quarters.

Gross NPA increased on a sequential basis to ₹1.12 lakh core but the ratio declined to 6.90% as on end-March as compared to 7.23% in December. Gross NPA ratio was 6.50% in March 2016.

The lender improved provision coverage ratio to 65.95% at the end of March from 62.87% in December. SBI said its contingency reserves were about ₹1,140 crore and the bank has made a provision of ₹5,900 crore, over and above the regulatory requirements.

Profitability was also boosted by a healthy growth in the net interest income which increased by 17.33% to ₹18,071 crore during the year under review.

However, non-interest income decreased marginally by 2.43% to ₹10,327 crore. There was a one-time gain in non-interest income in the January-March period of FY16 (repatriation of profit), which was not the case this time.

NIM declines

The bank's net interest margin from domestic operations declined by 16 bps year-on-year to 3.11% as on March 17 and increased by 8 bps sequentially from December 16. SBI stocks closed 1.72% higher on the BSE to ₹308.15, while the broader index was flat.