State Bank of India (SBI), the largest public sector bank in India, has announced its fourth-quarter results for the financial year 2022-23. The bank has reported a stellar performance, with its net profit soaring 83% year-on-year (YoY) to Rs 16,695 crore, beating market expectations. The bank has also declared a dividend of Rs 11.30 per equity share (1130%) for the financial year ending March 2023.
Key highlights of SBI Q4 results
- The net interest income (NII), which is the difference between the interest income and the interest expense, increased 28% YoY to Rs 40,000 crore in Q4FY23, up 5% quarter-on-quarter (QoQ).
- The pre-provision operating profit (PPOP), which is the profit before making provisions for bad loans and taxes, rose 27% YoY and declined 1% QoQ to Rs 25,000 crore in Q4FY23.
- The provisions, which are the funds set aside for covering potential losses from bad loans and contingencies, decreased 5% QoQ to Rs 5,500 crore in Q4FY23.
- The gross non-performing assets (NPAs), which are loans that are overdue for more than 90 days, reduced 24 basis points (bps) QoQ to 2.9% in Q4FY23. The net NPAs, which are the gross NPAs minus the provisions, dropped 3 bps QoQ to 0.70% in Q4FY23.
- The deposits, which are the funds that customers keep with the bank, grew 6% YoY and 2% QoQ to Rs 43 lakh crore in Q4FY23.
- The advances, which are the loans given by the bank to customers, increased 16% YoY to Rs 31.8 lakh crore in Q4FY23.
What drove SBI's Q4 performance?
According to the bank's management, the strong performance in Q4 was driven by several factors, such as:
- Robust growth in retail and corporate loans, especially in segments like home loans, agriculture loans, and small and medium enterprises (SME) loans.
- Improvement in asset quality and recovery from bad loans, aided by the resolution of some large stressed accounts and write-offs.
- Higher net interest margin (NIM), which is the ratio of NII to average interest-earning assets, due to lower cost of deposits and a higher yield on advances.
- Higher fee income from sources like treasury operations, card business, wealth management, and cross-selling of products.
- Lower operating expenses due to the rationalization of branches and digitalization of processes.
What is SBI's outlook for FY24?
The bank has given a positive outlook for the next financial year (FY24), with the following guidance:
- Loan growth of 10-12%, with a focus on retail and SME segments.
- Deposit growth of 8-10%, with emphasis on low-cost current account and savings account (CASA) deposits.
- NIM of above 3%, with scope for further improvement.
- Gross NPA ratio of below 3% and net NPA ratio of below 1%, with a higher provision coverage ratio (PCR).
- Return on assets (ROA) of above 1% and return on equity (ROE) of above 15%, with improved capital adequacy ratio (CAR).
How did SBI's stock react to Q4 results?
SBI's stock price closed at Rs 582 on May 18, down 0.77% from the previous day's close. However, the stock has gained over 50% in the past one year, outperforming the Nifty Bank index, which has risen about 40% in the same period. The stock is currently trading at a price-to-book value (P/BV) ratio of about 1.5x, which is lower than its peers like HDFC Bank and ICICI Bank.