SBI Beats Reliance Industries to Claim Top Spot Profit Race

In a remarkable turnaround, the State Bank of India (SBI) has outshined Reliance Industries (RIL) to become the front-runner in India’s corporate profit arena. For the quarter ending June 2023, SBI, the country’s largest public sector lender, reported a consolidated net profit of Rs 18,537 crores, surpassing RIL’s quarterly net profit of Rs 16,011 crore.

This shift marks only the second occurrence in the last two decades where SBI has achieved a higher net profit on a trailing 12-month (TTM) basis. This exceptional feat was previously witnessed during the July-September quarter of FY12.

RIL’s descent in the profit rankings can be attributed to a sharp downturn in its refining and petrochemicals segment, triggered by adverse price movements following the Russia-Ukraine conflict. As a result, RIL’s consolidated net profit plummeted by 10.6 per cent YoY, marking its weakest performance in 11 quarters.

In contrast, SBI’s resurgence is fueled by accelerated credit growth, an expanding spread between loan and deposit interest rates, and the resolution of past non-performing loans. SBI’s net profit for Q1FY24 surged by an impressive 153.1 per cent YoY, showcasing a remarkable achievement considering the low base in the corresponding period of the previous fiscal year.

This dramatic shift in profitability dynamics underscores the changing landscape of India’s economy, with the banking, financial services, and insurance (BFSI) and stockbroking sectors now contributing nearly 35 per cent of corporate profits – a substantial increase from the pre-pandemic level of around 10 per cent. Meanwhile, traditional industrial and manufacturing sectors have declined relatively, leading to muted revenue and profit growth.

While RIL’s diversification into newer ventures like retail and telecommunications has contributed to its earnings growth, these segments are yet to match the profitability of its more established industrial divisions. Despite its expansion into new areas, RIL’s consolidated net profit in Q1FY24 remained comparable to its earnings during the October-December quarter of 2020-21.

SBI’s ascendancy to the summit of India’s profit rankings signifies the evolving narrative of corporate success, reflecting the evolving strengths and challenges of different sectors in the aftermath of global economic shifts and unprecedented events.

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