MUMBAI: State Bank of India reported a 1% increase in its Q1FY25 net profit to Rs 17,035 crore from Rs 16,884 crore in the corresponding quarter last year. However, profits were almost flat due to a reduction in interest margins and a 70% jump in provisions for bad loans.
At the end of the first quarter, SBI’s deposits increased by 8.2% year-on-year to Rs 49 lakh crore.However, this was marginally lower than the Rs 49.2 lakh crore reported at the end of March 2024. The bank’s advances at the end of the quarter grew by 15.4% year-on-year to Rs 38 lakh crore, which is a 1.2% increase compared to March 2024.
“We raised deposits when other banks were not looking at deposits and we deployed the funds in investments. These investments are giving us headroom to grow our credit. On deposits, we are making an optimum choice not to raise funds at any cost and simultaneously take care of depositor interest. As a result, while our cost of deposits has gone up by 45 basis points, the impact on our NIM is much lower,” said Dinesh Khara, chairman of the State Bank of India.
The chariman of the country’s largest bank said that the current phase of deposits outpacing credit was temporary. “We have seen that when alternative options are available, people have gone to markets but bank deposits remain the channeling source. We had a similar situation in 2007 when loans outpaced deposits, but it was a temporary phenomenon which we should be able to navigate with our investment book,” Khara said.
He added that the bank was able to raise funds from infrastructure bonds and certificate of deposits and would not raise deposits at any cost.
“Our liquidity position is comfortable with a liquidity coverage ratio at 129%. Our credit to deposit ratio of 69% gives us head room for credit growth,” said Khara. He added that the bank could add Rs 7 lakh crore to its balance sheet without raising additional capital.
The net interest income only grew by 5.7% year on year to Rs 38,905 crore, despite advances growing at almost twice the pace of deposits. This was due to interest expenses increasing by 23.3% to Rs 70,401 crore, while interest income grew by 16.2% to Rs 1.1 lakh crore. As a result, the net interest margin decreased to 3.35% from 3.47% in the corresponding quarter last year. According to Khara, the bank could continue to operate with a net interest margin of 3.2% to 3.4% in the future.
“We do not have any challenges (on NPAs) Out of the Rs 7900 crore of slippages in Q1FY25 we have recovered Rs 4,600 crore after June 2024. Part of the increase in provisions are because of aging provisions for standard assets which are rising because our advances are growing,” said Khara.
The growth in credit for the bank was driven by corporate, agri and SME loans which grew 15.9%, 19.9% and 17% respectively. The retail segment which is 42% of the bank’s credit grew 13.6%. Within retail gold loans grew the most at 20.5% while home loans grew 13.3%. “Post increase in risk weightage in unsecured books, we have to keep in mind the risk weightage while growing loans. We are seeing a good opportunity in mid-corporates which is why our corporate loan book is growing,” Khara said.
The outstanding balance in savings accounts at SBI is nearly three times that of the next largest bank. Approximately 60,000 savings accounts are being opened daily. The bank has eight crore customers using its Yono app, and 63% of accounts are opened using the app..
Khara said that the bank was in the process of upgrading its ATM which resulted in the number of machines. He said that the bank was upgrading its flagship mobile app Yono in a phased manner.
At the end of the first quarter, SBI’s deposits increased by 8.2% year-on-year to Rs 49 lakh crore.However, this was marginally lower than the Rs 49.2 lakh crore reported at the end of March 2024. The bank’s advances at the end of the quarter grew by 15.4% year-on-year to Rs 38 lakh crore, which is a 1.2% increase compared to March 2024.
“We raised deposits when other banks were not looking at deposits and we deployed the funds in investments. These investments are giving us headroom to grow our credit. On deposits, we are making an optimum choice not to raise funds at any cost and simultaneously take care of depositor interest. As a result, while our cost of deposits has gone up by 45 basis points, the impact on our NIM is much lower,” said Dinesh Khara, chairman of the State Bank of India.
The chariman of the country’s largest bank said that the current phase of deposits outpacing credit was temporary. “We have seen that when alternative options are available, people have gone to markets but bank deposits remain the channeling source. We had a similar situation in 2007 when loans outpaced deposits, but it was a temporary phenomenon which we should be able to navigate with our investment book,” Khara said.
He added that the bank was able to raise funds from infrastructure bonds and certificate of deposits and would not raise deposits at any cost.
“Our liquidity position is comfortable with a liquidity coverage ratio at 129%. Our credit to deposit ratio of 69% gives us head room for credit growth,” said Khara. He added that the bank could add Rs 7 lakh crore to its balance sheet without raising additional capital.
The net interest income only grew by 5.7% year on year to Rs 38,905 crore, despite advances growing at almost twice the pace of deposits. This was due to interest expenses increasing by 23.3% to Rs 70,401 crore, while interest income grew by 16.2% to Rs 1.1 lakh crore. As a result, the net interest margin decreased to 3.35% from 3.47% in the corresponding quarter last year. According to Khara, the bank could continue to operate with a net interest margin of 3.2% to 3.4% in the future.
“We do not have any challenges (on NPAs) Out of the Rs 7900 crore of slippages in Q1FY25 we have recovered Rs 4,600 crore after June 2024. Part of the increase in provisions are because of aging provisions for standard assets which are rising because our advances are growing,” said Khara.
The growth in credit for the bank was driven by corporate, agri and SME loans which grew 15.9%, 19.9% and 17% respectively. The retail segment which is 42% of the bank’s credit grew 13.6%. Within retail gold loans grew the most at 20.5% while home loans grew 13.3%. “Post increase in risk weightage in unsecured books, we have to keep in mind the risk weightage while growing loans. We are seeing a good opportunity in mid-corporates which is why our corporate loan book is growing,” Khara said.
The outstanding balance in savings accounts at SBI is nearly three times that of the next largest bank. Approximately 60,000 savings accounts are being opened daily. The bank has eight crore customers using its Yono app, and 63% of accounts are opened using the app..
Khara said that the bank was in the process of upgrading its ATM which resulted in the number of machines. He said that the bank was upgrading its flagship mobile app Yono in a phased manner.
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