SBI's Q2 profit rises 14% to Rs 23,038 crore as bad-loan provisions fall; gross NPA eases to 1.39%

State Bank of India, the country's largest lender, reported a standalone net profit of Rs 23,038 crore for the July-September quarter. That was about 14.3% more than a year earlier, helped by lower provisions for bad loans and a one-time gain from selling part of its stake in its mutual fund arm.

The profit was above the roughly Rs 22,600 crore analysts had expected, Business Standard reported. Net interest income, the gap between what the bank earns on loans and pays on deposits, rose almost 15% from a year earlier to more than Rs 49,000 crore.

One-time gain lifts the bottom line

Other income fell nearly 5%, mainly because of lower treasury gains, even though it included about Rs 7,288 crore from the partial sale of SBI Funds Management. Operating profit fell about 1.4% from a year earlier to Rs 26,937 crore, according to IIFL. That was one reason the shares fell after the results. SBI closed about 1.8% lower at Rs 969.55 on the BSE on Tuesday.

Provisions for bad loans dropped by about a third to Rs 2,759 crore, though fresh slippages, or loans newly turning bad, rose to Rs 5,227 crore from Rs 4,754 crore a year earlier.

Asset quality and loan growth

The gross non-performing asset ratio improved to 1.39% from 1.47% in the June quarter, and net NPAs eased to 0.36% from 0.38%. Business Standard said the gross figure was the lowest in more than two decades.

Advances grew nearly 18% from a year earlier to about Rs 52 lakh crore, led by farm and small-business loans, which each grew around 22%. Deposits rose about 12% to nearly Rs 63 lakh crore. The domestic net interest margin improved 11 basis points from the previous quarter to 3.11%.

Chairman C S Setty said lower deposit costs and better loan yields had supported margins, and that he hoped to keep the domestic margin above 3%. He said further repo rate increases could add a few basis points to margins. SBI kept its guidance of 14-15% credit growth and 10-11% deposit growth for the year.

Because SBI is the largest lender to Indian households and businesses, its results give an early read on credit demand and asset quality across the banking system. This report is not investment advice.