India's Largest Bank, SBI Posts Record Profit in Q4

State Bank of India (SBI) reported a record standalone net profit of Rs 64.5 bn for the quarter ended March on the back of lower provisions for bad loans.

The fourth-quarter profit is a big jump from Rs 35.8 bn in the year-ago period.

The net interest income (NII) of the PSU bank, the difference between interest earned and interest expended, grew by 18.9% year-on-year (YoY) to Rs 270.7 bn in Q4FY21, on the back of loan growth of 5% YoY.

Non-interest income (other income) of the bank increased by 21.6% YoY to Rs 162.3 bn in Q4FY21.

As a result, the pre-provision operating profit (PPOP) jumped by 25.2% to Rs 197 bn during the same period.

Bank Lowers Provisions on Improving Asset Quality

The bank saw its asset quality improve during the quarter with the gross non-performing assets (NPA) as a percentage of gross advances falling by 0.5% sequentially to 4.98%.

The net NPA in the same period declined by 0.3% quarter-on-quarter (QoQ) to 1.5%.

Segmental Gross NPA

Slippages during the quarter stood at Rs 219.3 bn, while upgrades and recoveries stood at Rs 43.3 bn.

SBI reported retail slippages worth Rs 29.4 bn, agricultural slippages worth Rs 72.5 bn and corporate slippages worth Rs 64.5 bn.

As of 31 March 2021, SBI said that it had restructured loans worth Rs 53.2 bn under the Reserve Bank of India's one-time restructuring scheme for borrowers affected by the Covid-19 pandemic.

This included retail loans worth Rs 27.6 bn and corporate loans worth Rs 25.5 bn. The bank holds provisions worth Rs 11.2 bn against these loans. Total bad loan provisions fell to Rs 99.1 bn, down 16.6% YoY.

Overall, the total provisions and contingencies of the bank fell 18.1% YoY to Rs 110.5 bn but still remains at elevated levels. Sequentially, the same increased by 6.9%.

According to Dinesh Khara, Chairman, SBI, the bank is expecting asset quality pressures to abate during the current financial year.

While the bank is watching for the impact of the second wave of Covid-19 cases, at present the collection efficiency is at 96%.

Corporate Loan Book Contracts Due to the Pandemic

The bank's total domestic advances for the year rose 5.7% to Rs 21.8 tn.

Retail advances stood at Rs 8.7 tn, rising 16.5% from a year ago. In comparison, the domestic corporate loan book contracted 3% YoY.

Including investment in corporate securities, the corporate book increased marginally.

The drop in the outstanding corporate loan book was largely because companies did not utilize available credit lines, the bank's chairman said.

Large projects where the bank has already sanctioned credit lines did not take off due to the pandemic. However, as the situation normalises, these credit lines are expected to get utilised and push growth for the bank.

SBI Advances - FY20 vs FY21

In the retail segment, SBI saw its gold loans portfolio gain traction.

As of 31 March, the gold loan book, inclusive of agricultural and personal retail loan borrowers, stood at Rs 900 bn. The bank sees an opportunity to add another Rs 100 bn this financial year.

Total domestic deposits for SBI rose 14.26% from a year ago to Rs 35.7 tn.

The current account and savings account (CASA) deposits rose 16.7% YoY to Rs 16.5 tn whereas term deposits rose 12.2% from a year ago to Rs 19.2 tn.

FY21 Highlights

For the year FY21, the bank reported a net profit of Rs 204 bn, up by 40.9% from Rs 145 bn in FY20, driven by an increase in pre-provision operating profit and lower tax expenses.

The bank's net interest income grew by 12.9% compared to the previous year while its operating profit grew by 5% YoY.

The bank has reportedly received a windfall of nearly Rs 40 bn rupees as part of dues owed by bankrupt steelmaker Bhushan Power and Steel.

With respect to the dividend, the bank has declared a dividend of Rs 4 per equity share for the year FY21.

This is the first payout since May 2017, when it had rewarded shareholders with Rs 2.6 per share.

The date of payment of the dividend is fixed on 18 June 2021.

On the impact of Covid-19 on the bank, the management said -

"The spread of the pandemic across the globe has resulted in a decline in economic activity and an increase in movement in financial markets. In this situation, the bank is gearing up itself on all fronts to meet the challenges.

The situation continues to be uncertain and the bank is evaluating the situation on an ongoing basis. Major challenges for the Bank could be from extended working capital cycles, fluctuating cash flow trends and the probable inability of the borrowers to meet their obligations against the loans timely."

The bank is also proactively providing against the challenges of likely stress on the bank's assets. A definitive assessment of the impact of COVID-L9 is dependent upon circumstances as they evolve in the subsequent period."

How the Stock Markets Reacted to State Bank of India's Q4 Results...

State Bank of India shares opened at Rs 390.5 on the BSE and at Rs 390.0 on the NSE yesterday.

Shares of the bank rose 4.3% and 5.0%, respectively in intra-day after the bank reported its results.

They are now up about 40% so far this year (YTD) and have surged 151% in the last year.

The scrip touched its 52-week high of Rs 426.45 on 18 February 2021, and its 52-week low of Rs 149.55 on 22 May 2020.

At its current price, it is trading at a P/BV ratio of 1.4.

About State Bank of India

State Bank of India (SBI) is an Indian multinational, public sector banking and financial services statutory body headquartered in Mumbai, Maharashtra.

It is the 43rd largest bank in the world and ranked 221st in the Fortune Global 500 list of the world's biggest corporations and is the only Indian bank on the list.

It is also the largest bank in India with a 23% market share by assets and a 25% share of the total loan and deposits market.

The bank descends from the Bank of Calcutta, founded in 1806 via the Imperial Bank of India, making it the oldest commercial bank in the Indian Subcontinent.

The Government of India took control of the Imperial Bank of India in 1955, with the Reserve Bank of India (India's central bank) taking a 60% stake, renaming it to the State Bank of India.

For more details about the bank, you can have a look at SBI's factsheet and SBI's quarterly results on our website.

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