The State Bank of India (SBI) reported record quarterly profit on Friday, helped by higher net interest income and lower provisions to cover loan losses. The net profit of the country’s largest lender increased 80% from a year ago at ₹6,451 crore in the three months ended March 31, exceeding the average estimate of R6 of 6,166.2 crore in a survey of 10 analysts by Bloomberg.
Net interest income, the difference between interest earned and spent, increased 18.9% year-over-year to ₹27,067 crore. Its net domestic interest margin, a measure of profitability, narrowed 5 basis points (bps) to 3.26% from the previous December quarter. A basis point is equal to one hundredth of a percentage point.
Provisions, or money set aside to cover losses, fell 11% ₹13,249 crore in the fourth fiscal quarter as asset quality improved. Although the bank performed better than expected, the coming quarters could show some impact from the second wave of the pandemic. The second wave and the lockdowns that followed disrupted economic activity, although less severely than last year.
“The sharp rise in Covid-19 cases in recent times and the tight lockdowns in many places have slightly slowed down the economic recovery we have seen in the previous two quarters,” said the SBI chairman, Dinesh Khara.
The bank expects to grow its loan portfolio by 10% in the current fiscal year, significantly faster than the 5.67% growth seen in the fiscal year ended March 31.
The optimism stems from the performance of the retail segment, which grew 16.5% in fiscal 2021. The lender’s business loan portfolio, however, declined 3% during the year. fiscal year 21. If purchases of commercial paper and corporate bonds were included, the bank would have grown by 2.6%.
“The move is not up to par because it is demand driven,†Khara said, adding that the use of working capital was around 70% of the allowed limit. This, he says, means large companies are using even less than average. “Large companies have the opportunity to raise funds in the bond market. We support them in their efforts, â€he added.