BENGALURU, Aug.4 (Reuters) – India’s largest lender, State Bank of India (SBI.NS) on Wednesday announced record first quarter profit and bet on economic activity picking up to contain a peak in receivables questionable, sending its actions to a high-time.
National banks have struggled to contain bad loans, especially in their retail portfolios, as the pandemic and resulting lockdowns affected economic activity and limited borrowers’ ability to repay loans.
SBI saw a quadruple in slips, or new bad loans, for the first quarter ended in June, as its mortgage and small business segments struggled.
“If economic activity is back on track, our ability to maintain better performance in terms of asset quality will be maintained,” President Dinesh Khara told reporters after the results.
The country’s second deadly wave of COVID-19 has eased from a peak in April and May, allowing businesses to get to work, although restrictions are still in place in some states and analysts are worried about a third wave later this year.
The bank said it recovered 47 billion rupees of the 157 billion rupees of slippages in the June quarter in July. He also said he would still aim to keep its slippage rate for the current year at 2%, compared to India’s overall banking sector slippage ratio of 2.5% in fiscal 2021.
Half of SBI’s home loan portfolio, typically one of the most isolated segments for most lenders, is aimed at self-employed people. Khara said the bank aims to reduce its bad loans in the segment to less than 1% from 1.39% at the end of June.
It expects its loan portfolio to grow 9% in the current fiscal year, up from an earlier estimate of 10%.
Credit growth was 5.64% in the first quarter, driven by 16.5% growth in retail advances.
Net profit rose 55% to 65.04 billion rupees ($ 877 million) in the first quarter, against analysts’ estimates for a profit of 61.09 billion rupees.
A 16.92 billion rupee takeover of bankrupt Kingfisher airline also boosted results.
SBI shares closed up 2.3% at a record high of Rs 456.95. They outperformed the Nifty Bank Index (.NSEBANK) with a jump of over 60% this year.
($ 1 = 74.1800 Indian rupees)
Reporting by Chris Thomas in Bengaluru and Nupur Anand in Mumbai; Editing by Sriraj Kalluvila
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