The other income comprising fee, commission etc stood at Rs 13,346.11 crore in Q4Fy20, up from Rs 12.685.12 crore in same quarter in last financial year
State Bank of India (SBI), the country’s largest lender, posted an over tenfold rise in profit before tax (PBT) to Rs 4,970 crore for the quarter ended March 2020 (Q4FY20). The jump was mainly due to a decline in provisions and contingencies, and a one-time gain of Rs 2,731 crore arising from the sale of some stake in subsidiary SBI Cards & Payment Services. The lender had posted a PBT of Rs 431.20 crore in Q4FY19.
While the performance was lower than expectations, the positive commentary by the management helped the SBI stock close 7.9 per cent higher at Rs 187.8 per share on the BSE. The lender stating that about 20 per cent of its term-loan customer base had opted for moratorium also improved sentiment. SBI’s net profit in the quarter was Rs 3,581 crore, as against Rs 838 crore a year ago. According to a Bloomberg poll, analysts were estimating a PBT of Rs 7,496 crore and net profit of Rs 6,170 crore.
For the whole of FY20, SBI’s net profit rose to Rs 14,888 crore, up from Rs 862 crore in FY19, while PBT rose to Rs 25,063 crore, up from Rs 1,608 crore in the previous year. Apart from the stake sale in SBI Cards, the earnings for FY20 were also aided by Rs 3,484-crore profit earned from selling some stake in another subsidiary, SBI Life Insurance Company, in the September 2019 quarter. On an annual basis, both PBT and net profit are the highest ever the lender has reported. The previous net profit record figure was Rs 14,105 crore in 2012-13.
Its net interest income (NII) shrank by 0.81 per cent in Q4 to Rs 22,767 crore from Rs 22,954 crore the previous year. NII was down partly because of the clearing of stressed assets in the agriculture loan book, which led to a reversal of some income, SBI Chairman Rajnish Kumar
Other income, comprising of fees and commissions, stood at Rs 13,346 crore in Q4FY20, up from Rs 12,685 crore the previous year.
Referring to provisions for bad loans, Kumar said the bank had focused on recoveries, and this meant a lesser amount had to be set aside for slippage. Provisions (including for non-performing assets or NPAs) and contingencies declined to Rs 13,495.08 crore in Q4FY20 from Rs 16,501.89 crore in Q4FY19. Provision coverage ratio (PCR) improved to 83.62 per cent at end of March 2020, up from 78.73 per cent in March 2019. The asset quality of the bank also improved during the fourth quarter. The gross NPAs (GNPAs) declined to 6.15 per cent in Q4FY20, from 7.53 per cent in Q4FY19. The GNPAs were 6.94 per cent in Q3FY20. Net NPAs stood at 2.23 per cent in March 2020, down from 3.01 per cent in March 2019.
Asked about the risk of higher defaults and stress, Kumar said the bank is in a good position to deal with the adverse impact of economic disruption. The retail portfolio was robust with most loans given to those working with government and government-owned entities. The slippage ratio is unlikely to be more than 2 per cent, he said. However, the bank will wait for another three months to make a better assessment. The slippage ratio was 2.16 per cent in FY20.
Speaking about the impact of the Covid-19 pandemic on operations, Kumar said it has resulted in a decline in economic activity and increase in volatility in financial markets. The situation continues to be uncertain and major challenges would arise from extended working capital cycle and waning cash flows, he said.
The bank has made a 15 per cent provision of Rs 938 crore for Covid-19 impact, against the outstanding portfolio of Rs 6,250 crore, which was standard at end of February 2020. These loans would have slipped into NPA category by March without the Reserve Bank of India providing debt servicing relief. SBI also made Rs 234 crore as additional provision for these loans as a similar amount has been reckoned in the operating profit. Enhanced focus on digital medium, cost reduction, and employee productivity are expected to help SBI improve business and profitability. As on March 31, 2020, SBI’s deposits rose by 11.34 per cent to Rs 32.41 trillion. Interest rates on deposits are expected to be stable at current levels for some time. The future trend would depend on policy rate action, Kumar said.
Advances rose by 5.64 per cent to Rs 24.22 trillion in FY20, of this, retail loans rose by 15.4 per cent to Rs 7.47 trillion. The lender expects loan book to grow by 7-8 per cent in FY21. The Capital Adequacy Ratio (CAR) stood at 13.06 per cent as on March 31, 2020, with tier-I at 11 per cent. The bank holds capital above the regulatory requirements. It does not intend to approach the government or market to raise capital for now.
SBI will redeploy 20 per cent of employees from its administrative offices to sales and outbound activities to protect operating strength, and reduce corporate centre staff strength by half by allowing work from home, Chairman Rajnish Kumar said during an analyst interaction.
The bank has closed 35 regional business offices and 20 administration offices, and reduced employee headcount by 15,000 to 249,448 over FY18-20. The bank expects to save Rs 1,000 crore through HR cost optimisation. Employees to be redeployed would cover those up to deputy general manager level. SHREEPAD AUTE & ABHIJIT LELE