SBI plunges 6.7% in Q1 profit as Treasuries hit hard by yields

Bank sees loss of MTM 6,549 crore in the three months to June as bond yields hardened during the quarter. Banks hold a large share of government securities, including state government loans (SDLs) and treasury bills, as part of regulatory investment requirements. Therefore, any volatility in the bond market affects their earnings.

SBI has provided for such loss at the benchmark G-sec of 7.45% and hence no additional provisions would be required till that point. 10-year government securities or G-secs on Friday closed at 7.3% after the Reserve Bank of India raised the repo rate by 50 basis points (bps).

“We have done some calculations and if the Gsec yield goes up to 7.75%, we will have some component to provision which will be there somewhere. 2,000-3,000 crore, depending on the additional provisions that would be required,” said Dinesh Khara, chairman, SBI.

Khara said if the yield reaches 7.5%, the bank will have to set aside another amount 500 crores. Given that inflation is trending down and rupee is strengthening from its earlier levels, he believes yields are unlikely to touch those higher levels.

“We sincerely hope that we will be able to write back part of this MTM provisions in subsequent quarters. If the yield is 7.3%, we can write about 1,900 crores,” Khara said.

What was the net interest income of SBI – the difference between earned and spent? 31,196 crore in Q1, up 12.9% year-on-year but down 0.01% sequentially. Its domestic interest margin, a measure of profitability, was down 3.23%, 17 basis points (bps) compared to the March quarter.

The Bank’s Gross Non-Performing Assets (NPA) as a percentage of total advances stood at 3.91%, a decline of 6 bps sequentially and 41 bps over the corresponding period of last year.

“Fresh slippery for the quarter” 9,740 crores but we have already withdrawn almost 2,800 crore of the total slippage. The steady improvement in asset quality is also reflected in our cost of credit, which is up 61 basis points for the quarter.”

The bank expects 15% growth in its loan book in FY13. In Q1, SBI witnessed year-on-year (YoY) credit growth of 14.9% (including foreign office advances) and deposit growth of 8.7%. its balance sheet exceeded 50 trillion in the quarter

“As far as supporting credit growth is concerned, we are quite comfortable,” he said.

Without giving any specific target for deposit growth in FY13, Khara said SBI’s credit-to-deposit ratio currently stands at around 63% and the bank will see how it can deploy resources without compromising on margins. .

“The uptick in economic momentum has remained strong since January 2022. Credit growth in the system has also accelerated registering double digit growth over the past few months. Against this backdrop, I am happy to announce that the Bank has delivered very good results in terms of business, profitability and asset quality parameters. ,” said Khara.

SBI’s capital adequacy ratio under Basel III norms declined 23 basis points year-on-year to 13.43%.

first article