The country's largest lender SBI on Saturday reported a 9.13 per cent rise in consolidated net profit to Rs 16,099.58 crore for the September quarter, weighed down by money it had to set aside for employees' impending wage and pension revisions.
On a standalone basis, the State Bank of India (SBI) had a 8.03 per cent increase in the profit after tax for the reporting quarter at Rs 14,330 crore.
However, the same was down 15.13 per cent compared to Rs 16,884 crore in the June quarter.
Its core net interest income grew 12.27 per cent to Rs 39,500 crore on the back of a 12.39 per cent growth in advances but the Net Interest Margin (NIM) contracted 0.12 per cent to 3.43 per cent as the cost of deposits rose.
SBI chairman Dinesh Kumar Khara said the operating profit declined over 8 per cent to Rs 19,417 crore for the quarter.
He pointed to the surge in provisions for wages and pensions to over Rs 5,900 crore as a major factor behind the fall in operating profit.
The bank, which started provisioning for an increase in wages and pensions since last November, revised up the pay growth assumption to 14 per cent from 10 per cent resulting in the hit, he said.
A write-back of over Rs 1,200 crore from higher-than-required standard asset provisions done in the past helped reduce the hit of higher wage provisions on the bank's profits.
The loan loss provisions for the quarter were down 9.75 per cent to Rs 1,815 crore, helped by containing of slippages.
The gross non-performing assets ratio improved to a decadal best of 2.55 per cent.
With the Reserve Bank flagging caution on unsecured lending, Khara said there are no concerns for the SBI on this line and added that the unsecured loans' portfolio is better than secured loans.
The gross NPA from the unsecured book is only 0.69 per cent, he said, attributing the same to a focus on lending to those having salary accounts with the SBI and also ones working for better rated corporates.
Khara said the corporate loan growth was a muted 6.61 per cent, as entities focused on using internal accruals for making their investments.
Over Rs 1.5 lakh crore of Rs 4.77 lakh crore in corporate loans sanctioned earlier are awaiting disbursals, Khara said, pointing that it will do better in the second half on this aspect.
Khara hoped that the NIMs will stay at the same levels as the current one, and added that in the worst case, there can be a 3-5 basis points contraction in the number.
The bank is focusing on increasing its current account deposits to help garner adequate deposits for fuelling the high credit growth, he said, hinting that there will not be a hike in deposit rates amid what some in the industry call a "war for deposits".
It does not plan for any hike in savings bank deposits rate as being mulled or implemented by some rivals, and will not burn cash to push products like the central bank digital currency either, he said.
The bank is targeting to add 600 more branches to the current network of over 22,400 branches by the end of FY25, Khara said, adding that the private sector rivals launching dedicated offerings for semi-urban and rural areas are "aping" SBI.
The international book witnessed handsome growth on the back of companies' demand for external commercial borrowings and trade finance, Khara said, specifying that the bank has done well in the US, Japan and the Middle East.
Khara said it is business as usual at the branch in Tel Aviv, and there is no impact on the state-run bank's business as a result of the frostiness in ties with Canada as well.
It's overall capital adequacy stood at 14.28 per cent as of September 30 and Khara said there is no need for any new fund infusion either saying the buffers will go up beyond 15 per cent by end of March quarter once the profits from subsidiaries come in.
The bank doesn't have any plans to slice-off its digital banking offering Yono into a separate entity, Khara said, adding that the offering is central to the bank's own business.
Domestic brokerage StoxBox said it is a mixed set of results that was not expected from a giant like SBI.
"We feel that the bank has missed its direction and needs to buck up with the business growth, especially in this high-interest environment and intense competition," it said.