The market gave the State Bank of India (SBI), the largest lender in the country, a thumbs-up for its stable asset quality performance in the latest December quarter. However, the 30 per cent growth in net profit over last year was primarily driven by 24 per cent growth in other income.
The core net interest income growth, instead, remained muted at 9.2 per cent in the December quarter.
The pace of growth in core income has slowed since the September 2014 quarter when it witnessed 8 per cent growth, after a healthy 15 per cent recorded in the June quarter.
Loan growth also moderated to 6.9 per cent in the December quarter (from 9 per cent in the September quarter), lower even than the industry growth of about 10 per cent during the same period.
Home loan growth has slowed in the last couple of quarters. In the December quarter, home loans grew 13 per cent (18 per cent in 2013-14) and auto loans 10.8 per cent (12.6 per cent in 2013-14).
Growth in large corporate loans outpaced retail loans.
But despite these relatively poorer numbers, markets cheered the bank for its stable asset quality. After the dismal performance by its peers, such as Bank of Baroda and Punjab National Bank that saw increase in fresh slippages and additions to the restructured book, SBI was a welcome respite.
The trend in the SBI’s asset quality has been keenly watched over the last year, as gross non-performing assets (GNPA) shot up to 5.7 per cent levels and fresh slippages mounted to about ₹11,000 crore during the December 2013 quarter. The GNPA has been maintained at around 4.9 per cent since then, thanks to the bank’s effort to contain additional slippages in the last few quarters.
SBI also continues to have one of the lowest proportions of restructured assets among public sector banks at about 3.6 per cent of loans. SBI was the first among its peers to cut deposit rates in September last year, in a bid to keep margins intact.
However, the bank has not tweaked its base rate — to which all lending rates are pegged — yet. Lowering its cost of funds should help the bank keep its margins steady in the coming quarters.