SBI shares surge as net profit beats estimates
SBI reported net income of ₹5,196 cr in the quarter ended December 31
Shares of State Bank of India, the nation’s largest by assets, surged pacing gains on a gauge for the country’s banking stocks after the lender’s quarterly profit beat analysts’ expectations.
The lender’s shares jumped 5.7% at the close in Mumbai, to the highest since July 2019, compared with a 1.6% gain in the Bankex Index as investors cheered the fact that higher provisions for potential bad loans failed to stymie profit growth. SBI reported net income of ₹5,196 crore ($712 million) in the quarter ended December 31, compared to an average analysts’ estimate of ₹4,850 crore compiled by Bloomberg.
Earnings of the Mumbaibased bank, which accounts for about a fifth of loans in the country’s banking sector, is a key indicator of the health of India’s economy that’s set for a historic contraction this financial year. Lenders, which were already weakened by a two-year-old shadow lending crisis, are now struggling with one of the worst bad-loan ratios among major nations.
The bank set aside ₹10,340 crore to protect itself against potential problem loans, compared with about ₹10,120 crore three months earlier and ₹7,250 crore a year ago. It stepped up its provision coverage ratio to 90.2% as of end December from 81.7% a year ago. “The economic revival is coming back with a vengeance,” SBI’s Chairman Dinesh Khara said in a postearnings media call, adding that the lender expects credit growth to return to double digits.
Loans at the lender grew by 6.7% in the year to December 31. The bank’s gross bad-loan ratio was 4.77% at the end of December, compared with 5.28% three months earlier. But that ratio would have been 5.44% if India’s Supreme Court hadn’t barred banks from classifying any loans as non-performing assets, it said in the filing.
SBI has focused on providing more consumer loans, which are perceived as less risky than corporate borrowing, to minimize loan losses.
Still, the Reserve Bank of India expects non-performing assets in the banking sector to rise to 13.5% of total advances by the end of September from 7.5% last September.
If the number holds through the fiscal year ending March 2022, it would be the highest level since 1999.
SBI SET ASIDE ₹10,340 CRORE TO PROTECT ITSELF AGAINST POTENTIAL PROBLEM LOANS