State Bank of India Earnings Record Thanks to Growth in Personal Loans and Higher Provisions


(SBI) posted its highest quarterly net profit of Rs. 7,627 crore in the quarter ended September 2021, up 67% from Rs 4,574 crore the previous year, due to growth in loans to individuals and a marked improvement in the quality of assets which reduced provisions.

Total advances increased by 6%, driven by personal loans which rose by 15% and an 11% growth in mortgage loans largely covering the 4% drop in the portfolio of business loans. Home loans now constitute 24% of the bank’s domestic advances.

President Dinesh Khara expressed confidence that the bank will keep the growth momentum in line with economic growth, which will also increase the declining business loan portfolio so far. India’s largest lender hopes to increase its loan portfolio by 10% this year-end in March 2022.

“Capacity utilization is still low, at around 60%. Our undisbursed term loan facilities are approximately 27% while 50% of working capital is unused. 2.25 lakh crore will also be used as there is very clear visibility of the demand. The increase in capacity is happening and hopefully by the end of this quarter and the next there will be a significant improvement in capacity utilization which will help business credit return, “, Khara said.

A sharp drop in provisions also enabled the bank to improve its net income. Provisions were halved to Rs 2,699 crore, down 51% from Rs 5,619 crore a year ago due to improved loan recoveries, lower slippages and a recovery provisions made for Dewan Housing Finance Ltd (DHFL).

Slippages fell sharply to just Rs 4,176 crore in September 2021 from Rs 15,666 crore in the quarter ended June 2021 as retail loan collection efficiency improved to 95% after improvement of mobility after the devastating effects of the second wave of the pandemic.

The net NPA ratio fell to 1.52% from 1.59% a year ago, while the slip ratio fell sharply to 0.66% from 2.47% in June 2021, resulting in a drop of 51 basis points of the cost of credit year over year. One basis point is equal to 0.01 percentage point.

Khara did not give clear indications on the quality of the assets but indicated that the stress is on the decline.

“There is no major problem with the quality of the assets. Our underwriting standards have improved and the collection mechanisms have also improved,” he said, adding that the bank had provisioned at 100%. its exposure to the bankrupt Srei group.

Strong retail lending performance and improved asset quality also enabled the bank to fully provide Rs 7,418 crore for a change in family pension rules in one quarter, despite the regulator granting an exemption to amortize it in five years.


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