Economic recovery is 12 months away: Key takeaways from SBI earnings

State Bank of India, the country’s largest bank, came out with its earnings yesterday.

The bank registered a net profit of Rs 3,100 crore for July-September, up 41 percent from a year ago but down 7.4 percent from the previous quarter. In the year-ago period, the bank’s net profit stood at Rs 2,375 crore.

Its net interest income, the difference between the interest earned and interest expended, stood at Rs 13,275 crore, up 8.2 percent on year. The NII stood at Rs 12,251 crore a year ago. In the quarter ago, the figure stood at Rs 3,252 crore.

Here are the important takeaways from the earnings and management speak:

1. Bad loan coming under control: SBI has been truing its level best to get a firm hold on its bad loans, by identifying the problematic areas and intensifying the fight against wilful defaulters – borrowers who do not pay back even if they have the capacity to do so. Indications are these efforts are paying off. Gross non-performing assets (NPA) during the quarter have come down to 4.89 percent of its total loan book from 4.9 percent in the preceding quarter. Thus, its bad loans declined a total of 84 basis points (bps) since the third quarter of last fiscal, when it stood at a worrying 5.73 percent.

More from Economy

Inflation likely to be a big focus area for budget 2024, say sources Explained: Will the Bank of Japan break tradition and raise interest rates?

2. No recovery in sight: Though the bank’s loan book has witnessed a robust growth of 9.7% on year during the quarter, demand for credit from corporates is not yet picking up. SBI Chairman Arundhati Bhattacharya said at a press conference that the economic slowdown has been deep and once can expect only a gradual improvement. “The pace will pick up, but for the pace to pick up, we are 12 months away,” she has been quoted as saying in a report.

3. SMEs the sore spot: The pain is in the mid-sized corporate segment and agriculture. These are the segments that continued to be significant contributors to bad loans in July-September.

4. Reining in the expenses: The profit growth has been aided by a robust growth in other income. Operating profit also rose as the bank has been able to rein in operating expenses growth at about 2 percent on year to Rs 9,423 crore. It is, however, more than 8 percent higher than the previous quarter.

5. Do not generalise: As this Firstbiz article has noted, the positive development in the NPA situation cannot be extrapolated to other private sector banks. “Gross NPAs of total 40-listed Indian banks have grown by 17.5 per cent in the September quarter to Rs 2,68,933 crore from Rs 2,28,895 crore in the year-ago quarter and up by 7 percent compared with Rs 2,51,962 crore in the June quarter,” it said.