State Bank of India, the country’s largest lender, is targeting double-digit loan growth between 14-16 percent in the current financial year, Chairman Dinesh Khara said on November 5.
“This quarter was a busy season. That is why we had a strong credit growth. But I still expect, going by the current trend, we should have credit growth of 14-16 percent in the current financial year,” Khara said at a press briefing in Mumbai post the announcement of the bank's July-September results.
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He elaborated that within corporate loans, SBI is seeing capex-related demand while capacity utilisation is showing signs of improvement. The country's largest lender is seeing demand from infrastructure, renewable power, oil and marketing companies and services sectors, he added.
SBI’s credit growth jumped nearly 20 percent year-on-year in the fiscal second quarter, with domestic advances growing 18.15 percent. The growth in domestic advances was driven by corporate advances followed by retail personal loans.
Indian banks are recovering from the COVID-19 crisis, which rendered many Indians jobless. Now that the economy is recovering, credit offtake has improved significantly. To fund this credit growth, banks are mobilising deposits at a faster pace amid tight banking system liquidity.
When asked about deposit growth for SBI, Khara said that much of it will be depend on how the industry grows.
“I can only say that we will not be seen lagging behind industry,” said Khara.
In terms of guidance on bad loans, the Chairman said that SBI’s endeavour will be to keep bad loan ratios “as low as possible” with divulging any number. The bank’s restructuring book currently stands at Rs 27,336 crore and is behaving “very well,” he said.
Further, the bank has 14 offers for bad loan accounts transferred to the National Asset Reconstruction Company Limited (NARCL). Progress in loan accounts transferred to NARCL has been happening at a “rapid pace,” said Khara. He did not elaborate on the recovery expected from these accounts.
Q2 results:
Earlier on November 5, SBI reported a net profit of Rs 13,264 crore for the September quarter, a surge of 74 percent from a year earlier on improved asset quality and healthy loan growth.
The state-run lender’s profit beat street estimates by a mile. A Moneycontrol poll of eight brokerages had forecast net profit to be Rs 10,616.2 crore. While the sharp increase in quarterly profit comes from a healthy core interest income growth owing to a smart increase in credit expansion, there is a base effect at play also.
SBI's net interest income rose 12.83 percent to Rs 35,183 crore for the reported quarter, keeping with the improving trend of the previous two quarters. The bank’s interest earned rose 15 percent to Rs 79,859.59 crore while interest expended was Rs 44,676.15 crore, up from Rs 38,298 crore a year ago.
SBI’s gross non-performing assets were 3.52 percent of the total loan book, down from 4.90 percent a year ago. This is the lowest NPA ratio reported by the bank since FY12. The total gross bad loan pile reduced by 14 percent year-on-year and now stands at Rs 1.06 lakh crore.
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