SBI Q2 net rises 31% to Rs3,100 cr despite higher provisioning

State Bank of India (SBI), the country's largest lender, reported a 30.54 per cent jump in its fiscal second quarter net profit at Rs3,100 crore, compared to Rs2,375 crore during the July-September quarter of the previous financial year.

Profitability of the bank increased during the quarter despite a 41 per cent jump in provisioning for bad loans to Rs4,275 crore.

''The bank's profitability improved because of better growth in net interest income and non-interest income. We also controlled our expenses, as a result operating expenses increased by only 2.23 per cent,'' SBI chairperson Arundhati Bhattacharya said at a press conference.

SBI's net interest margin (NIM) dropped to 3.48 per cent from 3.54 per cent a year ago on account of slow growth in advances portfolio. ''We will try to hold the margins at 3.5 per cent for the year,'' added Bhattacharya.

Operating income, however, increased by 14.91 per cent to Rs17,845 crore in Q2FY15 from Rs15,529 crore in Q2FY14.

Net interest income (the difference between interest earned and expended) was up 8.36 per cent at Rs13,275 crore against Rs12,251 crore in the corresponding quarter of the previous fiscal year.

Fee cash flow increased by 18.98 per cent to Rs3,111 crore in Q2FY15 from Rs2,615 crore in Q2FY14

Advances grew 9.7 per cent year-on-year to Rs12,42,638 crore in the September 2014 quarter, resulting in a 9.8 per cent year-on-year growth in interest income at Rs37,263 crore.

Staff expenses were down 4.4 per cent, resulting in 2.2 per cent growth in operating expenses.

Other income grew at a healthy 39.4 per cent, helping to reduce cost to income ratio by 655 basis points to 52.8 per cent.

The bank's operating profit increased by 33.43 per cent to Rs8,422 crore during July-September 2014 compared to Rs6,312 crore in July-September 2013.

During the quarter, provisioning for bad loans jumped to Rs4,275 crore, signalling continuous pressure on asset quality. In September 2013, the bank provided for Rs3, 029 crore.

Gross NPAs for the quarter improved to 4.89 per cent as of 30 September 2014 from 5.64 per cent as of 30 September 2013. Net NPAs in September 2014 improved to 2.73 per cent from 2.91 per cent in September 2013.

Bank's recovery efforts helped the bank recover Rs2,635 crore during the quarter against Rs1,362 crore in the previous quarter.

The bank has a restructuring pipeline of Rs 3000 crore.

''Stress and slippages were across the board. In respect of agricultural loans there was a sharp spike which has not smoothen out and therefore there is still stress. But we are hopeful that as the debt waiver installments start coming in from Telangana and other states we would see some improvement going forward,'' said Bhattacharya.

On asset quality, Bhattacharya said, ''Asset quality improvement would be gradual and would happen once the demand picks up. But I think we are still 12 months away from demand picking up.''

SBI shares ended at Rs2,788.45 per share, gaining 2.55 per cent over its previous close on BSE.