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Record profit pushes SBI shares to all-time high – Mint

Shares of State Bank of India rose to their all-time high after the nation’s largest lender posted a record quarterly profit, driven by its non-lending business and lower provisions for bad loans.

Net income rose 55% to 65 billion rupees ($876.2 million) in the three months to June, according to a statement Wednesday, beating the average estimate of 54 billion rupees from 14 analysts in a Bloomberg survey. The stock rose 2.3% in Mumbai, outperforming the benchmark index’s 1% gain.

The latest coronavirus wave that struck in April hurt individuals’ ability to repay and caused more mortgages, gold loans and unsecured consumer loans to go sour. However, collections improved in July as the pandemic eased and the bank plans to accelerate growth of its home-loan portfolio, which is 58% of its retail loans.

“We have seen a very tough first quarter,” Chairman Dinesh Khara told reporters on a call. “Overall, it has been a reasonably good performance under the circumstances that we were in, and we expect further improvement in our performance going ahead.”

SBI will look to keep slippages — fresh bad loans — within 2% of total advances compared with 2.47% in April-June, Khara said. It aims to step up credit growth to 9% from 5.7% as the economy recovers.

For more key numbers read here

The results from SBI, which controls a fifth of India’s loan market, are a key barometer for the nation’s financial health and the lender will play a major role in the economy’s revival from the pandemic. The bank has been the country’s best performing state-run lender with relatively good asset quality compared to its peers, a strong secured retail lending portfolio and a robust bad-loan cushion.

The stock surge was accompanied by strong volume of more than 135 million traded shares, more than four times the three-month average. SBI closed at a record 456.95 rupees.

Key Insights

Income from SBI’s non-lending business rose 24.3% to 11800 crore with fees growing almost 21%

Loan slippages stood at 156.7 billion rupees in first quarter, down from 219.3 billion rupees three months earlier

SBI’s gross bad-loan ratio widened to 5.32% at the end of June, from 4.98% three months earlier

The bank set aside 10050 crore for provisions, compared with 11,050 crore in the March quarter and 12,500 crore a year ago.

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