SBI Q4 Net Shoots Up 327% Year-On-Year On One-Time Gain

State Bank of India’s (SBI) Q4 FY20 standalone net profit jumped 327% year-on-year (y-o-y) to Rs.3,581 crore on the back of a one-time gain of Rs.2,731 crore from the sale of its stake in its credit card subsidiary and an 18% y-o-y reduction in provisions to Rs.13,495 crore. The lender sees itself going back to its performance of FY18 when it had posted a net loss of Rs.6,547 crore on a full-year basis, even in the COVID scenario.

The bank’s provisions fell despite its decision to take higher-than-mandated provisioning against accounts that had been given a repayment moratorium in March. SBI chairman Rajnish Kumar said the lender had treated all these accounts — worth a total of Rs.6,250 crore— as slippages in terms of provisioning and set aside 15% against them, as against the regulatory requirement of 10% spread over two quarters.

Asked about the kind of scenarios the bank had factored in the widespread disruption arising out of COVID and the lockdown, Kumar said, “In the current circumstances, I would say we have three scenarios — one is we repeat the performance of FY20. If things go worse then we repeat the performance of FY19 and if things go very bad then we repeat the performance of FY18.”

Eighty-two percent of the bank’s customers have paid two or more installments in the last few months and 92% have paid at least one installment. In the corporate book, 13% of borrowers have not paid any installment, Kumar said. “The amount is very, very insignificant, I would say,” he added. The bank’s investor presentation showed that 23% of its term loans are under moratorium and 21.8% of customers have availed the benefit, without specifying a date.

The asset-quality impact of the pandemic and the associated lockdown will start to become apparent in September, Kumar declared.

“We have done all the analysis of our corporate book and retail book, but unless we know how things turn out to be as we exit the lockdown, anything would be just a guess,” Kumar said, adding that any conclusions can only be arrived at after another three months.

SBI’s operating profit fell to 7% y-o-y, as per the numbers filed with the exchanges. Kumar said the bank is taking an eight-quarter view, and in FY22, it targets clocking an operating profit of Rs 1.4 lakh crore. The bank hopes to restrict the slippage ratio at 2% in FY21. In Q4 FY20, slippages fell 51% sequentially to Rs.8,105 crore. The bank’s net interest income fell 0.81% y-o-y to Rs.22,767 crore and its domestic net interest margin shrank 65 basis points (bps) sequentially to 2.94% as a result of interest reversals in the Agri loan book.

SBI’s gross advances grew 5.64% to Rs.24.23 lakh crore as on March 31, 2020.  Addressing the question of loan growth in FY21, Kumar said, “We had budgeted for a 12% growth in the loan book, but that seems unlikely in the current scenario. We believe it should be somewhere between 5% and 12%; the midpoint is 7-8% and that is where we should be.”

Deposits grew 11.34% y-o-y to Rs.32.42 lakh crore as on March 31, with the current account savings account (CASA) ratio falling 58 bps y-o-y to 45.16%. There was an improvement on the asset quality front as the gross non-performing asset (NPA) ratio fell 79 bps sequentially to 6.15% and the net NPA ratio slid 42 bps to 2.23%. SBI’s shares ended 7.9% higher than their previous close on the BSE at Rs.187.80 on Friday.