State Bank of India is raising its loan growth target for the ongoing fiscal, boosted by the central bank’s recent credit reforms and the government’s slashing of consumption taxes, chairman Challa Sreenivasulu Setty said on Tuesday.
“(RBI’s measures) are definitely credit accretive…We are revising our (loan growth) guidance from 11%…to 12 to 14% now (for the fiscal year),” Setty said at SBI’s earnings press conference.
The country’s largest lender by assets reported net profit rose 10% to 201.6 billion rupees ($2.29 billion) for the three months ended September 30, largely on the back of the 45.93-billion-rupee gain it made from the sale of its stake in Yes Bank.
SBI’s gross advances grew 12.7% and total deposits rose 9.27%.
Earlier this month, the regulator allowed banks to fund acquisitions and raised the cap on loans for buying shares at initial public offerings, as part of a raft of measures to boost bank lending in the world’s fifth-largest economy.
“We know corporates very well and I don’t think (acquisition financing) will be new to us,” Setty said, adding that SBI may collaborate with foreign lenders to grow this portfolio.
SBI’s profit rises on Yes Bank stake sale, margins expand sequentially
India also slashed taxes on hundreds of consumer items ranging from soaps to small cars, effective September 22, to spur domestic demand.
The bank has already logged increased demand in some categories of consumption loans, including a “phenomenal pickup” in automobile loans in October after the tax cut announcement.
“We believe that there will be sustained consumption demand, which gives an opportunity for us particularly in the retail, agriculture, and micro, small, and medium enterprises segments,” Setty said.
Growth in SBI’s loan book is seen as an indicator of broader economic trends in the country.
Corporate loans have picked up for SBI after several quarters of slowdown, with the lender expecting double-digit growth in the segment in the second half of the year, Setty said.
Corporate loans grew 7.1%, while retail advances jumped 15.1% in the September quarter.
SBI’s net interest income rose 3.3% year-on-year to 429.84 billion rupees, above estimates of 419.73 billion rupees, as per data compiled by LSEG.
Its domestic net interest margin (NIM) contracted 18 basis points year-on-year, but expanded 7 basis points quarter-on-quarter to 3.09%.
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