State Bank of India (SBI), which became the country’s most profitable company in the fiscal second quarter with a consolidated net income of Rs 14,752 crore, has revised upwards its credit growth target to 14-16% for the current financial year.

The bank’s credit growth, SBI chairman Dinesh Khara said, will be led by strong demand for capex and corporates replacing overseas credit with rupee loans. Capacity utilisation is also showing signs of improvement.

SBI had earlier projected credit growth at 11-12% for FY23.

The country’s largest lender has a corporate loan pipeline of Rs 3.5 trillion under sanction. SBI is seeing demand from infrastructure, renewable power, oil and marketing companies and services sectors.

“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% in the current financial year," Khara said post the announcement of the bank’s July-September results.

SBI’s loan book grew 21% year-on-year for the fiscal second quarter ended September, driven by corporate and personal loans. International business saw 18% YoY loan growth in dollar terms.

On deposit growth, Khara said that much of it would depend on how the industry grows. “I can only say that we will not be seen lagging behind industry,” he added.

Khara said the bank’s restructuring book currently stands at Rs 27,336 crore and is behaving “very well”.

SBI has 14 offers for bad loan accounts transferred to the National Asset Reconstruction Company Limited (NARCL).

Strong Q2 performance

SBI’s consolidated net income was at Rs 14,752 crore, higher than Mukesh Ambani-controlled Reliance Industries Ltd’s (RIL) net earnings of Rs 13,656 crore for the September quarter. RIL, which took a hit of Rs 4,039 crore in windfall tax on its exports during the quarter, has been the most profitable corporate in India.

On a standalone basis, SBI reported a 74% YoY rise in net profit to Rs 13,264.62 crore for the September quarter on the back of strong loan growth, higher interest income and lower provisions.

Total income increased to Rs 88,734 crore during the quarter under review from Rs 77,689.09 crore a year earlier. SBI's net interest income rose 12.83% YoY to Rs 35,183 crore.

Of the total income, more than one-fourth, or Rs 24,400 crore, came from investment gains, though the bank has not booked profit from government securities in which it holds an additional exposure of more than Rs 3.85 lakh crore, Khara said.

Domestic net interest margins (NIM) improved 5 basis points on a YoY basis and 32 basis points on a QoQ basis to 3.55%. Credit cost improved by 15 bps YoY to 0.28% for Q2FY23.

The asset quality of the bank improved with gross non-performing assets (NPAs) falling to 3.52%, down from 4.90% a year ago and 3.91% a quarter ago. This is the lowest NPA ratio reported by the bank since FY12.

Net NPAs dropped to 0.8% in September 2022 quarter from 1% in June 2022 quarter and 1.52% in September 2021 quarter.

Provisions for bad loans declined to Rs 2,011 crore from Rs 2,699 crore.

In absolute value terms, gross NPAs declined by 13.8% to Rs 1,06,804 crore and net NPAs by 36.5% to Rs 23,572 crore.