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Earnings Call Transcript for the State Bank of India (SBI) Conference Call between Analysts and Management on Q1FY21 results. Click to read full transcript.
Key Highlights from Management
Mr. Pawan Kedia: I extend a warm welcome to all joining us today on SBI Q1 FY21 results via video conference call.
We have Mr. Rajnish Kumar, Mr. Dinesh Kumar Khara – Managing Director, Global Banking and Subsidiary. Mr. Arijit Basu – Managing Director, Commercial Client Group and IT, Mr. C. S. Setty – Managing Director, Retail and Digital Banking with additional charge of stressed assets and Mr. J. Swaminathan – Deputy Managing Director, Finance, all deputy managing directors heading various verticals are also on the call with us.
I request our Chairman to give a brief summary of the bank’s Q1 FY21 performance and the strategic initiative undertaken. I would like to read out the safe harbor statement. Certain statements in these slides are forward looking statements. These statements are based on management’s current expectation and are subject to uncertainty and changes in circumstances. Actual outcome may differ materially from those included in these statements due to a variety of factors. Thank you. Now I would request Chairman to make his opening remarks.
Mr. Rajnish Kumar: Thank you everyone. I welcome all of you to this virtual analyst meet and I have my Managing Directors, Mr. Dinesh Khara, Mr. CS Setty, Mr. Arijit Basu and Deputy Managing Director (Finance) Mr. J Swaminathan present in this room and my other colleagues, have joined on the call. This is the third quarter in succession where our Bank has given a very good performance and there are quite a few reasons for the same.
One is that the Net Interest Income has shown a very decent growth of 16.14% YoY. The Net Interest Margin (domestic) has also increased because one of the Bank’s main performing ratio is constantly going up, and in, this quarter we don’t have many interest reversals. Operating Profit is up by 36% YoY and Net Profit is up by 81% YoY. Net NPA is down on a year-on-year basis by 121 bps. Provision Coverage Ratio up by almost 700 bps.
Capital Adequacy Ratio is up by 51 bps, Deposits have shown a very decent growth of almost 16%, Advances are of course a still bit subdued at 6.58%. Our liability franchise which is the main strength of the bank, they have performed very well again, all helped by our distribution network as well as the technology platform which the Bank has created.
Our internet banking and mobile banking are amongst the best as far as the technology is concerned. The Bank has aggressively been providing for loans and today as a result of that the Net nonperforming loans of the bank has come down to 42,000 and out of which the corporate is just Rs. 10,500 crores.
Hence, the entire legacy book of the Bank has been taken care of. If we talk about the provisions for the coming quarter, bank has made an extra provision of Rs. 5,500 crores and above the minimum requirement. This includes those accounts where they were SMA as on 1st of March and Rs. 13,000 crores of the Rs. 42,000 crores is the amount in which only one installment has been received or no installment has been received and that has been provided at 15%.
There is one large HFC account which has been fully provided for during March end even though the Bank had a dispensation to provide over 4 quarters. So one quarter provision was done in March last year and we could have done in 3 quarters but we decided that we will provide both the loan and bond fully. So net debt value of nearly Rs. 10,000 crores exposure is zero whereas the expectation is that in the third quarter there will be fairly decent recovery even in this account going by the expression of interest which has been received by the administrator.
So the Banks’ overall provision has obviously come down because of the reason that there is no legacy. The legacy provision has come down and talking about the moratorium, since that is the main subject of discussion during these times, we have given the information on the working capital and term loan. On a book of Rs. 16 trillion, only 9.5%, which would be about Rs. 1.55 trillion, is where the bank has received either one EMI or no EMI. Within this, we have 2% or Rs. 320 billion of housing loan that are included and very well secured and are Double A and above corporates on identical amounts.
This shows that this is a category of accounts where people are using this opportunity to preserve their cash and no stress would come as and when the moratorium gets lifted. As a Bank, what we are watching is the lower end corporates, the medium enterprises and the small enterprises and a lot of help is also coming from the Government.
As far as the working capital loans are concerned, there is a capitalization of interest accrued and deferred which is just Rs. 4884 crores and Rs. 44,101 crores is the total amount of Interest on Loans which is 11%. So, overall we can safely say that this is the picture and as on 30th June, there is not any cause of worry. But at the same time, we will continue to be very watchful and step up all our efforts in regard to the recovery as well as in the retail accounts and wherever there is a very advanced stage of resolution.
As I mentioned, some of the accounts in the corporate book which are relatively large, the Bank is holding a 100% provision. There is an expectation that in the next 2 quarters, i.e. September and December quarter, the Bank will be able to recover a very decent amount. So overall there is a fairly good amount of excess provision which we are holding in our book.
That is where it gives us a fairly good cushion for any slippages that are not currently anticipated. And in terms of our outlook for our NPAs, our best case scenario remains 1.5-1.6% and anything which is unusual will remain over and above that. These are some of my opening remarks. Digital story continues to be very, very strong and again we have come out with many new products which will give a huge productivity gain to the Bank. If you look at our Overheads, despite the impact of a salary revision, the Overheads growth is just 2%. This is the result of the productivity gains which are coming to the Bank. Our Cost to Income ratio is now down to 50%.
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