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State Bank of India seems to have weathered the impact of the Covid-19 pandemic on its business rather well so far, reporting two consecutive quarters of robust net profit in the current financial year.
India’s largest bank reported a 52 per cent jump in second quarter standalone net profit at ₹4,574 crore (₹3,012 crore in the year-ago quarter) on the back of lower loan loss provision burden and higher net interest income.
The bank reported a 9 per cent increase in the net profit over the April-Junequarter .
Slippages
While the bottomline looks strong, potential pain points could emerge as SBI has estimated total slippages and restructuring at about ₹60,000 crore for FY2021.
In line with this, the bank expects credit cost (loan impairment charges) to go up to 2.5 per cent (of loans) against the earlier guidance of 1.8 per cent under normal circumstances.
Chairman Dinesh Kumar Khara said: “Additional proforma slippages which we have reckoned are ₹14,388 crore as on September 30, 2020.
“If we account for the pull back (accounts getting regularised) in October 2020, we have actually pulled back about ₹6,000 odd crore worth of advances.”
As per the Supreme Court’s interim order of September 3, 2020, lenders have been directed that “accounts which were not declared non-performing assets (NPA) till August 31, 2020 shall not be declared as NPA till further orders.”
Hence, the bank has come up with “additional proforma slippages” to take into account the possibility of such accounts slipping. SBI has estimated further slippages of ₹20,000 crore in the second half of FY21.
Restructuring
The bank has received Covid-related restructuring requests aggregating ₹6,495 crore in October 2020 and it expects additional restructuring of about ₹13,000 crore till December 2020.
Khara said: “We have already received restructuring requests worth about Rs 6,495 crore and for that we have provided another Rs 650 crore in Q2 (July-September) FY21.”
CS Setty, MD, said of the restructuring requests received by the bank, ₹2,400 crore came from the retail book (mostly micro, small and medium enterprises); and about ₹4,000 crore from the corporate book.
In the case of personal loans and home loans, only 2,600 customers and 4,291 customers, respectively, have given applications for restructuring aggregating ₹1,300 crore, he added.
In the case of MSME segment, 35,000 customers have asked for restructuring.
Loan loss provisions were 49 per cent lower at ₹5,619 crore (₹11,041 crore). Fresh slippages during the reporting quarter were down to ₹2,756 crore against ₹8,805 crore in the year-ago quarter.
In the reporting quarter, net interest income was up 15 per cent year-on-year (yoy) at ₹28,181 crore (₹24,600 crore).
Total non-interest income, including fee income, profit/ loss on sale of investments, forex income and miscellaneous income, was down 29 per cent at ₹8,528 crore (₹12,023 crore — includes one-off item due to stake sale in SBI Life of ₹3,484 crore).
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