State Bank of India (SBI) reported a 68.47% year-on-year jump in net profit to Rs 14,205 crore for the quarter ended December 2022 on the back of a sustained growth in its loan book, treasury gains and improved asset quality. 

Credit growth target at 14-16%

India’s largest lender reported a loan book growth of 17.60% to Rs 31.33 trillion, led by retail credit. The corporate book also started showing good growth over the earlier year. 

Retail personal loans grew by 18.10% to Rs 11,24,519 crore. The home loan segment grew 13.88% YoY to Rs 6,13,196 crore while car loans rose by 20.51% to Rs 93,319 crore. 

The corporate book grew by 18.08% to Rs 9,25,038 crore during the fiscal third quarter ended 31 December 2022. The SME book of the bank grew 14.16% YoY to Rs 3,50,649 crore and the agriculture loans increased by 11.52% to Rs 2,46,999 crore.

SBI's total exposure to the embattled Adani group is about Rs 27,000 crore or 0.9% of the overall loan book. “As of now, we don't envisage any challenge from the group to meet debt obligations. There are no lending against shares to the conglomerate," SBI chairman Dinesh Khara said on a post-earnings call.

The bank expects credit growth to stay strong in the next fiscal. “We expect our credit growth to be at 14% to 16%. We are adding quality assets. Our corporate loans are funded by market borrowing rather than from deposits,” Khara said.

Deposit growth lagging behind

The bank’s total deposits grew 9.15% YoY to Rs 42.13 trillion. On a quarter-on-quarter basis, it rose by just 0.56%. 

The term deposits at Rs 22.47 trillion accounted for more than half of the deposit base of the bank. CASA (current account savings account) stood at Rs 18 trillion, up 5.88% over the year-ago period, and constituted 44.48% of the bank’s total deposit base. The remaining 55.5% were term deposits, both on the retail and the corporate side.  

“We may not be compelled to accelerate the growth of our deposits as we are sitting on Rs 3.2 trillion worth of excess SLR (statutory liquidity ratio). But in deposit buckets where we think it will be attractive, we will price it in line with the market,” Khara said.

NII and margins

SBI’s net interest income (NII), or the difference between interest income earned and interest expended, was up 24.05% YoY to Rs 38,069 crore. NII in the September quarter of 2022 was Rs 35,183 crore.

Since about 74% of the loans were pegged at external benchmarks like the repo and the MCLR (marginal cost of funds-based lending rate), the bank’s ability to price the loans higher boosted its interest income. 

The bank’s non-interest income rose 32.22% to Rs 11,468 crore. 

Net interest margin (NIM) improved by 29 basis points YoY to 3.69% from 3.15% a year. 

Asset quality

The lender's asset quality improved, with the gross non performing asset (NPA) ratio declining 136 bps YoY to 3.14% (Rs 2,76,795 crore) for the December quarter. During the quarter, recovery and upgrades was Rs 1,643 crore while fresh slippages stood at Rs 3,098 crore. The bank wrote off Rs 10,014 crore of loans during the quarter.

Net NPA was 57 bps down to 0.77%. In absolute terms, net NPAs declined 32% to Rs 23,484 crore in the quarter.

Slippage ratio for the December 2022 quarter stood at 0.41% while credit cost improved by 28 bps YoY to 0.21%.

Capital adequacy ratio (CAR) at the end of Q3FY23 stood at 13.27%.