SBI’s 42% profit increase in Q3 explained; here’s how it happened

SBI reporting a big jump in the Q3 net profit is a positive sign for the country’s banking sector when the economy requires support from the banks, Madan Sabnavis, Chief Economist, CARE Ratings, said. “(It) is a positive for the bank and industry and indicates that the bank may be up the curve from now on. This is a good sign as 2020-21 will require substantial support from banks and SBI being the largest will have a decisive role to play”, Madan Sabnavis, Chief Economist, CARE Ratings, also told Financial Express Online.

SBI on Friday posted a 41 per cent rise in net profit in Q3FY20 on lower bad loan provisions and better asset quality. The net profit rose Rs 6,797.25 crore in the October-December quarter this fiscal compared to Rs 4,823.29 crore in the year-ago period, SBI said in an exchange filing. The consolidated income surged to Rs 95,384.28 crore in the third quarter from Rs 84,390.14 crore in October-December 2018-19.

“SBI results were a mixed bag. Stress on the Balance Sheet continues to be high and current year NCLT recoveries should be low”, investment advisor, Sandip Sabharwal told Financial Express Online.

“Excluding the impact of this one-time additional hit, net profit in Q3FY20 would have been Rs 6,916 crore against Rs 3,955 crore in Q3FY19,” SBI said. The bank also reduced provisioning for bad loans (standalone) to Rs 8,193.06 crore for the third quarter of 2019-20 as against Rs 13,970.82 crore in the corresponding quarter of last year. The country’s largest PSU bank also showed improvement with the gross non-performing assets (NPAs) that declined to 6.94 per cent of the gross advances as at December 31, 2019 from 8.71 per cent by same period in 2018. SBI shares settled at 2.38 per cent higher at Rs 318.10 on BSE.

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