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SBI tapers FY21 credit growth expectation to 7%; double-digit loan growth seen from Q2 FY22

SBI shares hit a 52-week high on Thursday


State Bank of India, the country’s largest lender, has lowered its credit growth expectations for the year ending March 2021, and now expects loans to grow at around 7 per cent for the full year, compared with the 8-9 per cent growth it had seen earlier.

The main reason behind this is subdued growth in corporate advances, even as retail credit growth is back to pre-COVID levels.

“Corporate loans have been subdued. When it comes to any capital expenditure from the private corporate sector, I think it will be some time away even now. So, right now we will continue to see the growth coming from the public sector entities capex. We are now left with just two months. So, now I have tapered (credit growth) it to 7 per cent,” SBI chairman Dinesh Kumar Khara said on Thursday 

The lender, though seemed confident looking ahead of even corporate loan growth improving, and is hopeful that credit growth will return to double digits from the second quarter of 2021-22 financial year as economic growth hit hard by the COVID-19 pandemic bounces back. 

“The reason for the confidence is that if at all there is going to be infrastructure spend, the way it has been indicated in the Budget, there is going to be a definite improvement in economic activity in the core sector, which is iron and steel, cement and also the construction sector," Khara told reporters.

"So, that will lead to the demand generation. Once there is demand generation, in the past, we have seen improvement in economic activity and the availment of (credit) limit as well. I think, maybe from the second quarter onwards, we should be in a position to see a double-digit credit growth in 2021-22,” he said. 

In the quarter ended December 30, SBI’s gross advances rose 6.73 per cent to Rs 24.57 lakh crore, mainly driven by retail personal loans, which surged 15.5 per cent year-on-year, while SME (small and medium enterprises) advances gained 5.6 per cent and corporate credit was up 2.2 per cent.

Home loans, which constitute 23 per cent of the bank’s domestic advances have risen 10 per cent from a year ago. 

The state-owned lender reported a net profit of Rs 5,196 crore in the quarter ended December 2020, which was up close to 14 per cent when compared with the July-September quarter. However, on a year-on-year basis, net profit was down 7 per cent. 

It must be noted in the year-ago quarter, SBI had a one-off interest income and other income (the Essar Steel bankruptcy resolution got completed then), and excluding that the net profit would have risen 134 per cent, the lender said.

The bank's total provisions in the third quarter were also slightly higher at Rs 10,342 crore, compared with Rs 7,253 crore, a year ago. 

In the December quarter, SBI’s net interest income rose 4 per cent from a year ago and 2.3 per cent sequentially to Rs 28,820 crore. 

The bank has seen an improvement in its asset quality both on a year-on-year as well as a sequential basis. Its gross non-performing assets (NPA) in the December quarter declined to 4.77 per cent, from 5.28 per cent in the September quarter and 6.94 per cent a year ago. 

Similarly, its net NPAs came in at 1.23 per cent last quarter, compared with 1.59 per cent in the second quarter and 2.65 per cent in the year-ago quarter.

Shares of SBI and other public sector lenders have surged this week after Finance Minister Nirmala Sitharaman proposed a new asset management company that would take over non-performing assets from banks. A sum of Rs 20,000 crore for recapitalisation of state-owned banks was also proposed.

On Thursday, SBI shares hit a 52-week high of Rs 358 and closed 5.7 per cent higher to Rs 355.10.  

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