State Bank of India has reported a 28% year-on-year rise in net profit to Rs 18,331 crore for the quarter ended September, driven by improved asset quality and higher non-interest income.

In the year-ago period, the country’s largest lender had reported a net profit of Rs 14,330 crore. Sequentially, the profit rose by 7.61% from Rs 17,035 crore in Q1 FY25.

SBI's non-interest income, which includes earnings from investments, jumped 41.5% to Rs 15,270 crore.

Provisions and contingencies rose sharply to Rs 4,506 crore from Rs 115 crore a year ago, while provisions for bad loans doubled.

NII

Net interest income (NII), or the difference between interest earned on loans and paid on deposits, rose 5.37% to Rs 41,620 crore from Rs 39,500 crore a year ago. Sequentially, NII rose by 1.2% from Rs 41,125 crore in Q1 FY25.

NIM

Net interest margin (NIM) from domestic operations declined to 3.27% from 3.35% in the June quarter and 3.43% in the year-ago period.

SBI chairman CS Setty said, “The NIM compression has been contained and there shouldn’t be any further fall. The interest rates on deposits have peaked. The yield on advances will improve as the bank has increased the MCLR rates.”

The cost of deposits for domestic operations rose to 5.03% in the quarter ended September 2024 from 4.65% a year ago and 5% a quarter ago.

The yield on advances increased to 8.87% in Q2 of FY25, from 8.86% a year ago and 8.83% a quarter ago.

Asset quality

The bank’s asset quality profile improved, with gross bad loans as a proportion of total loans falling to 2.13% as on 30 September 2024, from 2.55% a year ago and 2.21% a quarter ago.

Net non-performing assets (NPAs) ratio declined to 0.53%, from 0.57% in June 2024 and 0.64% in September 2023.

The provision coverage ratio (PCR), including written-off accounts, stood at 92.21%, up from 91.93% a year ago. 

Fresh slippages during the September quarter stood at Rs 4,871 crore, up from Rs 3,831 crore a year ago. Sequentially, slippages were at Rs 7,903 crore in Q1 FY25.

Loan book

The bank’s gross advances grew 14.93% YoY to Rs 39.21 lakh crore.

Of this, the domestic corporate loan book grew the highest over 18% YoY to Rs 11.57 lakh crore. 

Retail loans grew 12.3% to Rs 13.96 lakh crore. Home loans increased 13.66% YoY to Rs 7.64 lakh crore. SME credit grew 17.36% to Rs 4.57 lakh crore. Agriculture loans rose by 17.67%.

Setty, in the post-results press conference, said the bank has a corporate loan pipeline of Rs 6 lakh crore. The bank expects 14-16% loan growth in the current financial year.

On being queried about lending to the airline sector, Setty said, “Not many airlines are left now to be funded. We have funded airlines based on ownership, not just operational parameters. Although these factors are important for credit underwriting, I don’t think we would be taking big bets on the airline industry going forward.”

Deposits

Lagging behind credit, the bank’s deposits grew 9.13% YoY to Rs 51.17 lakh crore as on 30 September 2024.

CASA (current account savings account) deposits grew by a modest 4.24%. The CASA ratio declined to 40.03% as of 30 September 2024, from 41.88% a year ago and 40.70% a quarter ago. 

SBI has cut its deposit growth guidance for FY25 to 10-11% from its previous estimate of 12-13%. 

The bank’s board has approved raising an additional Rs 20,000 crore through infrastructure bonds during the remaining part of the current fiscal.