SBI releases Q1FY23 results, here are top five takeaways

The state-owned lender's other income includes fee income, earnings from foreign exchange and derivative transactions, profit or loss from sale or revaluation of investments, dividend from subsidiaries and recoveries made in written-off accounts.

“Operating profit for Q1FY23 at Rs 12,753 crores as against Rs. 18,975 crores in Q1FY22, impacted by MTM (mark-to-market) losses on investment book. The MTM hit also had an adverse impact on bank’s RoA (return on asset) and RoE (return on equity), which stand at 0.48 percent and 10.09 percent, respectively,” the bank said in a release on August 6.

SBI has the largest portfolio of fixed income securities of which government securities form a big chunk. The rise in bond yields during the June quarter saw the lender incur huge losses in its trading book. When bond yields rise, their prices come down.

Banks are mandated to mark their investments to prevailing market prices and charge the gains or losses to the profit and loss account, also known as mark-to-market gains or losses.

As banks have been witnessing a downtrend in other income primarily due to a hit on treasury books, they are now focusing on growing their other income through fees from various third-party products.

“We have other sources of income, and we feel that the markets will correct themselves and we may see an upward trend in treasury income at least in September (quarter),” Union Bank Managing Director and Chief Executive Officer (MD & CEO) A Manimekhalai told Moneycontrol in an interaction on August 1.

2 Stable advances growth

As per the release, SBI's total advances grew 14.9 percent YoY and 2.9 percent sequentially to Rs 29 lakh crore, in line with the industry average.

Of the total advances, domestic corporate loans grew 10.6 percent to Rs 8.74 lakh crore as on June end. Retail personal loans grew 18.6 percent YoY to Rs 10.34 lakh crore during the same period and home loans rose 13.8 percent on year at Rs 5.75 lakh crore.

3 Deposits stable but CASA ratio dips QoQ

SBI’s total deposits grew 8.7 percent YoY to Rs 40.45 lakh crore as on June 30.

Domestic low-cost current account and savings account deposit (CASA) rose 6.5 percent on year to Rs 17.67 lakh crore during the quarter. The CASA ratio, however, was 64 basis points (bps) lower on year at 45.33 percent. One basis is one-hundredth of a percentage point.

On account of stable loan growth, SBI’s net interest income, the difference between interest earned and expended, grew 12.9 percent on year to Rs 31,196 crore during the April-June period.

Domestic net interest margin, a key indicator of lenders’ profitability, stood at 3.23 percent during Q1, 17 bps lower on a sequential basis but 8 bps higher YoY.

4 Asset quality sustains

SBI’s headline gross non-performing asset (GNPA) ratio stood at 3.91 percent as of June 30, 6 bps lower on a sequential basis. Its net NPA ratio stood at 1 percent, 2 bps lower quarter-on-quarter (QoQ).

Provisions for NPAs remained 15.1 percent lower YoY at Rs 4,268.1 crore. The provision coverage ratio (PCR), meanwhile, was at 90.14 percent.

Provisions refer to the amount a bank needs to set aside to cover the losses from a loan account. When an account turns into an NPA, the provisions required will equal the full loan amount.​

The bank’s fresh slippage ratio increased to 1.38 percent during Q1 from 0.43 percent last quarter. The credit cost ratio, or the amount set aside for potential bad loans, stood at 0.61 percent during the reporting quarter, higher than 0.49 percent a quarter ago.

5 Operating expenses high

Even as its other income dipped in the June quarter, SBI's operating expenses also remained high, impacting Q1 bottomline, analysts said.

The bank's operating expenses stood at Rs 8,704.2 crore, up from Rs 7,928.1 crore in the year-ago quarter.

SBI’s capital adequacy ratio stood at 13.43 percent, lower than 13.83 percent in the March quarter and 13.66 percent in the same quarter of the previous year. Its common-equity tier-I ratio was at 9.72 percent, while additional tier-I capital was at 1.43 percent during the same period.