The country's largest lender State Bank of India (SBI) on January 31 reported a healthy 41 percent year-on-year growth in profit at Rs 5,583.4 crore for the December quarter, boosted by lower provisions.
The growth in highest ever quarterly profit was also driven by recovery from bad accounts (including Essar Steel), NII, other income and operating income, but impacted by higher tax cost.
The bank in its BSE filing said during the quarter, it exercised the option of lower tax rate taking a one-time hit of Rs 1,333 crore. Excluding the impact of this one-time additional hit, net profit in Q3FY20 would have been Rs 6,916 crore (against Rs 3,955 crore YoY), it added.
The stock reacted positively, trading at Rs 320.45, up Rs 9.75, or 3.14 percent on the BSE at 1350 hours.
Net interest income during the quarter grew by 22.42 percent year-on-year to Rs 27,778.8 crore, with loan growth of 7.4 percent YoY.
Deposits growth during the quarter stood at 9.92 percent, with current account deposits growing 9.27 percent and saving bank deposits 8.19 percent YoY, the bank said.
Domestic net interest margin (NIM) improved to 3.59 percent in Q3FY20, registering an increase of 62 bps YoY and 37 bps sequentially, it added.
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As expected, asset quality improved, with gross non-performing assets (NPAs) as a percentage of gross advances falling 25bps sequentially to 6.94 percent and net NPA declining 14bps to 2.65 percent in the quarter ended December 2019.
In absolute terms, gross NPA fell 1.22 percent sequentially to Rs 1.59 lakh crore and net NPA declined 2.8 percent to Rs 58,249 crore in Q3FY20.
SBI said slippages at Rs 16,525 crore for the quarter included exposure to a large housing finance company (approximately Rs 7,000 crore), which increased 88 percent compared to Rs 8,805 crore seen in September quarter. Reports suggested that it could be DHFL.
Slippage ratio increased significantly to 2.94 in Q3FY20, from 1.57 in Q2FY20, it added.
Recovery and upgrades during the quarter were Rs 13,553 crore (including big amount from Essar Steel), against Rs 3,931 crore in previous quarter, the bank said in its BSE filing.
Provisions for bad loans fell sharply by 25.8 percent sequentially (down 41.4 percent YoY) to Rs 8,193.06 crore.
Provisions and contingencies dropped 44.80 percent sequentially to Rs 7,253 crore, but the same increased 20.76 percent compared to year-ago period.
Provision coverage ratio improved to 81.73 percent at the end of December quarter, against 81.2 percent in September ended quarter.
Rajiv Mehta, VP-Equity Research at IIFL Wealth Management said there were more hits than misses as operational numbers were very strong. "Asset quality was quite manageable and higher slippages were on expected lines during the quarter.)
Ravikant Bhat, Research Analyst at IndiaNivesh, and Kajal Gandhi of ICICI Direct told CNBC-TV18 that they have a buy call on the stock after strong operational numbers.
Pre-provision operating profit grew by 44.34 percent year-on-year to Rs 18,222.56 crore in Q3FY20, the bank said, adding other income (net interest income) rose by 13.3 percent to Rs 9,105.92 crore during the quarter YoY.
SBI said FY19 gross and net NPA divergence stood at Rs 11,932 crore each, with provision divergence at Rs 12,036 crore.
Hence, there was a loss of Rs 6,968 crore in FY19 after the abovementioned divergence, against reported profit of Rs 862 crore.