In an unexpected turn of events, SBI’s profit jumps by 81% after selling stakes in the life insurance business. More specifically, SBI boasted of a standalone net profit of Rs. 4,189.34 crores, for the quarter ended June 2020 (FY21).
As on June 30, 2020, we are asymptomatic (vis-à-vis the impact of Covid-19)…However, like an individual, we (the bank), too, have to be on guard. – Rajnish Kumar, Chairman at SBI
Over Q1FY21, the bank saw a 36.8 percent rise in profit before tax (PBT). Plus, the net profit, as well as operating profits, grew on a consolidated basis. SBI’s net interest income also increased by 16.1 percent yearly.
This comes after SBI raised Rs. 1,539.73 crore in June this year on selling 2.1 percent equity stake in SBI Life Insurance Company Limited.
These numbers are in massive contrast to what analysts had estimated. Emkay Global Financial Services expected a net profit of Rs. 3,155.6 crores, with HDFC Securities pegging it at Rs. 3,330 crores. That’s why the fact that SBI’s profit jumps by 81% comes as a surprising piece of news to many.
The provision of Rs 3,008 crore is held by the bank on Covid-19 related accounts as on June 30, 2020._ SBI said in a statement
During Q1FY21, the bank made ad-hoc provisions for wage revision, fraud accounts, and additional provisions toward COVID-19 related accounts. Taking all these provisions into account, the total provisions saw a 36.1 percent year-on-year increase.
Compared to slippages posted in Q1FY20, the bank reported that slippages in Q1FY21 have declined. Additionally, provisions for bad loans also fell, which is a wonderful sign for SBI.
Gross non-performing assets (GNPA) in percentage terms, improved by 71 bps quarter-on-quarter. Furthermore, net NPA declined during the quarter under review. As a result, the asset quality improved sequentially. According to the bank, its total deposits also grew year-on-year. All these factors collectively worked in the favor and SBI’s Profit jumps by 81%.
Evidently, State Bank of India’s stake sale in SBI Life Insurance Company was a mind-blowing idea. As a way of skyrocketing profits by 81.2%, this just managed to cushion the bank from the COVID-19 blow.