State bank of India conducted a conference call on 03 February 2023 to discuss its financial results for the quarter ended December 2022. Dinesh Kumar Khara, Chairman of the bank addressed the call:

Highlights:

The long term strategy of the bank is to build sufficient resilience in the balance sheet. Bank has been proactive in identifying the risk and making adequate provisions.

The bank has again posted the record high quarterly net profit in Q3FY23 from the previous high in Q2FY23.

The business volume growth has been strong and the asset quality has improved to the best level in the last 6 years. The asset quality of the bank remains one of the best in the industry.

The net interest margin has improved driven by uptick in yield and credit growth. The bank expects to maintain a stable margin going forward. The expenses were impacted due to the provision for wage revision.

The credit growth momentum has remained strong and it is contributed by all the segments.

The GNPA level of the bank has dropped below Rs 1 lakh crore mark to Rs 98000 crore end December 2022.

The GNPA ratio has declined to 3.14% and NNPA ratio to 0.77%. The slippage ratio has moderated to 0.41% which is reflected into the reduced credit cost of 0.21% in Q3FY23.

The restructured loan book of the bank declined to Rs 26035 crore end December 2022. The bank is holding sufficient provisions against restructured loan book.

The write off of loans is usually higher in Q3 and Q4 of the financial year, so it stands at Rs 10000 crore in Q3FY23.

The bank has one of the lowest credit-deposit ratio and the excess SLR stands at Rs 3.2 lakh crore.

About 70% of the loan book of the bank is linked to the external benchmark linked lending rate of which 40% is linked to the MCLR and any hike in deposit rates gives an opportunity to raise MCLR.

The loan mix between retail and the corporate would remain stable at current level by March 2023.

The bank has booked MTM gains of Rs 2200 crore in Q3FY23.

The international loan book of the bank in dollar terms has increased by 9.15%. The bank expects to maintain the margins in the international loan book at current level.

The bank has maintained the guidance of 14 to 15% loan growth for FY2023.

The bank had already provided 100% of provision for a securities receipt book of Rs 7500 crore.

After adding profits, the bank expects its capital adequacy ratio to be 14.5% by March 2023 which would be supportive to loan growth of 17 to 18%. The bank would be looking at various options such as Tier I and II instruments for capital raising.

The share of public sector banks in the Adani Group borrowings has declined from 55% in FY2016 to 31% in FY2022. The public sector banks exposure to the group has declined over the last few years and recent acquisitions have been financed through foreign borrowings and market instruments.

Banks own exposure is well below the large exposure framework and stands at 0.88% of the overall loan book of the bank at end December 2022.

Majority of the exposure is towards completed operating assets and completed projects generating cash flows and under construction projects which are on schedule. The loans extended by SBI are secured by project assets and no facilities are granted on an unsecured basis. The mechanisms are in place to ensure timely servicing of loan facilities.

There is no record of default or delay till date the bank has not extended any loans against pledge of promoter shares.

Non-fund based exposure is mostly towards letter of credit, bank guarantee etc. No concern on group servicing of loans at this point of time.

The industry growth is broad based and the bank expects growth to remain healthy for next year.