SBI posts record profit on lower provisions, strong other income

livemint.com:

MUMBAI : India’s largest lender State Bank of India (SBI) on Friday reported a net profit of ₹16,884 crore for the three months through June, more than double of last year, led by a surge in other income and lower provisions to cover bad loans. For the state-owned bank, the June quarter profit was its highest ever, beating the Bloomberg estimate of ₹15,032 crore. The substantial annual increase in other income was on a low base, a result of mark-to-market (MTM) loss in Q1 of FY23.

Its net interest income— the difference between interest earned and expended— rose 25% to ₹38,905 crore. The bank’s domestic net interest margin (NIM), a key indicator of profitability, however, contracted 37 basis points (bps) sequentially but showed an improvement of 24 bps from the previous year to 3.47%. Like its peers, SBI is also seeing the impact of its deposits repricing, an effect that kicks in with a lag.

The bank’s cost of domestic deposits increased 56 bps sequentially to 4.55%. “NIM is always dynamic because the yield on advances will keep on changing and the cost of deposits will also keep on changing," said Dinesh Khara, chairman, SBI. “We are very mindful that we should try to have a decent NIM, which also means we should not unnecessarily overprice our borrowers and should not underpay our depositors." While asset quality improved in Q1, with gross bad loans as a percentage of total loans declining 2 bps sequentially and 115 bps y-o-y, its fresh slippages rose sequentially.