The bank witnessed MTM loss of ₹6,549 crore in the three months to June as bond yields hardened during the quarter. Banks maintain large holdings of government securities, including state government loans (SDLs) and treasury bills, as part of regulatory investment requirements. Therefore, any volatility in the bond market hits their income.
SBI has provided for such losses at the benchmark G-sec of 7.45% and therefore up to that point it would not need additional provisions. The 10-year government securities or G-sec closed at 7.3% on Friday after the Reserve Bank of india’s 50 basis point (bps) repo rate hike.
“We have done some calculations and if the Gsec yields go to as high as 7.75%, then also we will have some component for provisioning which will be somewhere around ₹2,000-3,000 crore, depending upon additional provisions that would be required," said Dinesh Khara, chairman, SBI.
Khara said that if the yield touches 7.5%, the bank would need to set aside another ₹500 crore. Given that inflation is trending down and the rupee is strengthening from its earlier levels, he believes that the yield is unlikely to touch those high levels.
“We are quite hopeful that we would be able to writeback part of this MTM provisions in the subsequent quarters. If yields are at 7.3%, we can writeback about ₹1,900 crore," said Khara.
SBI’s net interest income – the difference between interest earned and expended – stood at ₹31,196 crore in Q1, up 12.9% y-o-y, but down 0.01% sequentially. Its domestic interest margin, a measure of profitability, was at 3.23%, 17 basis points (bps) lower than the March quarter.
The bank’s gross non-performing assets (NPAs) as a percentage of total advances stood at 3.91%, down 6 bps sequentially and 41 bps from the same period last year.
“Fresh slippages for the quarter stood at ₹9,740 crore but we have already pulled back almost ₹2,800 crore of the total slippages. The consistently improving asset quality is also reflected in our credit cost, which stands at 61 basis points for the quarter," said Khara.
The bank expects to grow its loan book by 15% in FY23. In Q1, SBI witnessed a credit growth (including foreign office advances) of 14.9% year-on-year (y-o-y) and a deposit growth of 8.7% y-o-y. Its balance sheet crossed ₹50 trillion in the quarter
“We are quite comfortably placed as far as supporting the growth in credit is concerned," he said.
Without giving any specific target for deposit growth in FY23, Khara said that currently SBI’s credit-to-deposit ratio is around 63% and the bank will see how best it can deploy the resources without compromising on margins.
“The pickup in the economic momentum since January 2022 has remained strong. Credit growth has also picked up in the system posting double digit growth in the last few months In this backdrop, I am pleased to announce that the bank has delivered reasonably good outcome in business, profitability and asset quality parameters," said Khara.
SBI’s capital adequacy ratio under Basel III norms stood at 13.43%, down 23 bps y-o-y.
