Indian Profit League: SBI new champion, beats RIL to top spot

Turbo-charged by booming credit growth, rising spread between interest earned and interest paid, recovery of written-off loans, Indian banks are in the pink of their financial health and leading the pack is behemoth State Bank of India, the country’s largest lender for decades. The bank’s profits have jumped to a level that has helped it to surge ahead of the country’s most profitable company Reliance Industries (RIL) to emerge at the top of the coveted league, the Business Standard has reported.

Incidentally, RIL virtually monopolised the top slot of the profit charts of India Inc for more 10 years. But Mukesh Ambani’s company was pipped to the post by India’s oldest bank in Q1 (April-June) of the current financial year.

SBI reported a consolidated net profit (adjusted for exceptional gains and losses) of Rs 66,860 crore during the trailing 12-month (TTM) that ended on June 30 this year. RIL could achieve a TTM-adjusted net profit of Rs 64,758 crore in the same time period.

The bank’s standalone net profit in Q1 of FY24 stood at Rs 18,537 crore, far ahead of RIL’s quarterly net profit of Rs 16,011 crore.

Incidentally, in the Fortune 500 rankings published earlier this month, SBI occupied the 235th slot while RIL ranked 88th, the highest for any Indian company.

The other companies ranked in terms of profits in Q1 of FY24 are Indian Oil (Rs 14,437 crore), HDFC Bank (Rs 12,370.4 crore), TCS (Rs 11,074 crore), BPCL (Rs 10,823.9 crore), ICICI Bank (Rs 10,636.1 crore), Adani Power (Rs 8,759.4 crore), HPCL (Rs 6,765.5 crore) and Axis Bank (Rs 6,091.4 crore).

Traditionally RIL competed with PSU oil and gas majors such as Oil and Natural Gas Corporation (ONGC) and Indian Oil Corporation (Indian Oil) for the label of India’s most healthy bottom line.

This is only the second occasion in the past 20 years that the PSU bank has reported a higher net profit on a TTM basis than RIL. In Q2 of FY12 SBI reported a TTM net profit of Rs 18,810 crore which was a shade higher than RIL’s consolidated net profit of Rs 18,588 crore.

RIL was last humbled in the profit numbers by Indian Oil. It was more than 10 years ago – in the TTM ended Q1 of FY13. Till Q3 of FY12, ONGC was often ahead of RIL in the profit contest.

Experts attribute RIL’s losing out the top slot on account of a decline in refining and petrochemicals in the oil-to-chemicals business due to adverse price movement in the global fuel and petrochem scenario following the Russia-Ukraine war. It drove down RIL’s consolidated net profit by as much as 10.6% (year-on-year) to Rs 16,011 crore in Q1 of FY24. Incidentally, it was the giant’s lowest numbers in the past 11 quarters.

In comparison, fortune smiled on SBI in the form of faster credit growth, rising spread between interest on loans and interest on deposits, and the reversal of loans that were written off earlier. The bank’s net profit jumped by 153.1% (year-on-year) in Q1 of FY24, helped by a favourable base in Q1 of FY23.

The origins of the State Bank of India can be traced back to Strand Road in Calcutta (now Kolkata) when Bank of Calcutta was set up on June 2, 1806. State Bank was formally established in 1955 when its head office was still in Kolkata. The headquarters was shifted out from the city to Mumbai in the 1970s, the decade when Bengal was marred by the rise of ultra leftwing extremism, administrative chaos a sharp rise in militant trade unionism.