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SBI touts strong 'immunity' as profit surges in pandemic

07/31/2020 | 06:07am EST
A man checks his mobile phones in front of State Bank of India (SBI) branch in Kolkata

State Bank of India (SBI) posted a sharp increase in net profit on Friday and provided a steady outlook for the coming quarters, even as the coronavirus crisis ravages the country's economy.

SBI's results come as Indian lenders brace for a flood of potential loan defaults, with many small businesses finding it hard to operate as the pandemic crushes demand.

"(It's) safe to presume that as on June 30 we are asymptomatic and we have built strong immunity," Chairman Rajnish Kumar said on a post-earnings conference call, citing funds the bank had set aside to cover for loan losses.

The lender reported an 81% surge in profit and better asset quality as bad loan provisions dropped.

Its provision coverage ratio, or the percentage of funds set aside for loan losses, was 86.32% as of quarter-end compared with 83.62% in the previous quarter.

Gross bad loans as a percentage of total loans eased to 5.44% from 6.15% in the previous quarter.

Provisions for bad loans fell 19%, though the bank set aside 18.36 billion rupees ($245.50 million) in anticipation for loans that could go bad.

Around 9.5% of the bank's term loan book by value was under moratorium at June end, Kumar said, compared with 23% at previous quarter's end. The management is confident that loan recoveries will pick up from the September quarter.

Currently, no large accounts are in trouble, Kumar said.

Gains from selling a stake in unit SBI Life Insurance drove SBI's net profit to 41.89 billion rupees for the quarter from 23.12 billion rupees a year earlier.

Net interest margin, a key indicator of profitability, rose to 3.24% from 3.01%.

The bank's shares closed up 2.6% after the results in a weak Mumbai market.

By Nupur Anand and Chris Thomas

© Reuters 2020
Stocks mentioned in the article
ChangeLast1st jan.
BANK OF INDIA LIMITED -2.46% 53.5 End-of-day quote.9.97%
SBI CARDS AND PAYMENT SERVICES LIMITED -0.42% 955.7 End-of-day quote.12.34%
SBI LIFE INSURANCE COMPANY LIMITED -1.59% 910.4 End-of-day quote.0.68%
STATE BANK OF INDIA -1.11% 303.85 Delayed Quote.10.51%
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