Key highlights from State Bank of India (SBIN) Q2 FY24 Earnings Concall
- Financial Performance
- Net profit increased 8.03% (YoY) to INR14,330 crores.
- Operating profit declined 8.07% YoY to INR19,417 crores.
- ROA improved 34 bps YoY to 1.10% in H1 FY2024 but moderated 3 bps YoY to 1.01% in Q2 FY24.
- ROE increased significantly by 649 bps YoY to 22.57% in 1H24.
- NIM grew 12.27% YoY due to higher yields and credit growth.
- Domestic NIM fell 12 bps YoY to 3.43% in Q2 FY2024 due to higher cost of deposits.
- Opex increased 34.60% YoY, mainly due to additional provisions for impending wage revision.
- Business Growth
- Domestic advances was up 13.21% YoY, led by growth in SME of 22.75% YoY, retail of 15.68% YoY and agriculture of 14.76% YoY.
- Corporate advances rose slower at 6.62% YoY.
- Domestic deposits grew 11.80% YoY, driven by current and savings account growth.
- Excess Credit Portfolio Quality
- Stands at INR3.2 trillion as of Sep 2023.
- Accounts for 25% of total retail portfolio of INR12.43 trillion.
- Gross NPA ratio low at 0.69%, indicating resilience of portfolio.
- 6% of customers are govt./armed forces employees, 12% are corporate employees.
- Impact of Wage Revision
- Additional provision of INR3,417 crores in Q2FY24 for upcoming wage revision.
- Provisioning rate increased retrospectively to 14% from 10% from Nov 2022.
- Resulted in decline in Q2 operating profit and other profitability metrics.
- Sensitivity is about INR100 crores per month for every 1% increase.
- Expect about INR400 crores per month higher wage bill after revision.
- Asset Quality Improvement
- Gross NPA ratio declined 97 bps YoY to 2.55%, lowest in over 10 years.
- Slippage ratio improved 16 bps YoY to 0.70%.
- Credit cost improved year over year.
- PCR including AUCA increased 39 bps YoY to 91.93%.
- Digital and Subsidiaries Progress
- 61% of savings accounts sourced digitally through YONO.
- Increased traction in cross-selling through YONO.
- Earned INR190 crore fee income through YONO in Q2 FY24.
- YONO opened to customers of other banks, saw 25 lakh registrations.
- Margin and Profitability Outlook
- Expect margins to remain around current levels or compress 3-5 bps more.
- Impact is mainly from higher deposit costs.
- Loan pricing concessions already offered, seeing good traction.
- Deposit cost increases have bottomed out.
- Target is to be a 1.2% ROA bank.
- Budgeting and monitoring aligned to 1.2% ROA target.
- Corporate Loan Pipeline and Outlook
- Have pipeline of INR3.4 trillion proposals awaiting approval.
- 4 trillion proposals pending disbursement.
- Projects cater domestic economy so global issues may not impact much.
- Expects approved proposals to get disbursed and aiming to see lower double digit growth in corporate loans.
- Overall Loan Growth
- SME and retail growth sustainable and outpacing projections.
- Guidance is around 14% growth.
- Balance Sheet and Provisioning
- Investments increased to INR17 trillion, 8.2% QoQ growth in G-Secs and SDLs.
- Borrowings raised to fund credit growth or invest excess deposits.
- Reversed INR1,200 crores of provisions for standard assets.
- SME Loan Growth and Portfolio
- Grown SME book from INR3 trillion to INR3.88 trillion currently.
- Achieved 20% growth in identified products aligned to risk appetite.
- Introduced pre-approved loans seeing strong growth.
- Expect to sustain 20%+ growth going forward.
- Working capital loans seeing 57% growth indicating higher utilization.
- Term loans growing around 25%.
- Average ticket size up to INR50 crores.
- Deposit Rate Increases
- Not raised deposit rates materially in last few months.
- Bulk of deposit repricing already over.
- Some more repricing pending which will pan out next quarter.
- International Loan Growth
- Growing in certain markets like US, Middle East and Japan.
- Not looking for aggressive growth internationally.
- Expect to maintain current growth trends going forward.
- Mortgage Growth Trends
- Mortgages remain a competitive segment, but seeing healthy traction with 20-25% sequential growth.
- Added 150 CPCs last year aiding sourcing capabilities.
- Expects decent growth momentum to continue.
- Savings Deposit Trends
- Focusing more on growing current accounts, up 8% YoY.
- Opened 30-40 lakh savings accounts and 1.4 lakh salary accounts.
- No plans to increase savings deposit rates.