India’s largest lender State Bank of India posted a 6.7% year-on-year (YoY) dip in net profit at Rs 6,068 crore in the first quarter (Q1) of the financial year 2022-23 (F23) against Rs 6,504 crore in the same quarter last fiscal. The state-owned bank’s net profit missed street estimates by a huge margin.

The huge dip in profit was due to treasury losses also known as mark-to-market losses. SBI’s fixed income portfolio is among the largest among all banks and a majority of it is composed of government securities. A sharp increase in bond yields during the April to June period led to huge losses for the bank. Bond prices come down when yields rise. Banks are required to mark their investments to current market prices and charge the gains or losses to their profit or loss account.

SBI’s treasury losses significantly impacted non-interest income during the quarter.

Net interest income for the quarter grew by 13% YoY to Rs 31,196 crore in Q1FY23 while non-interest income declined 80% during the period to Rs 2,312 crore with a loss on investments reported at Rs 6,549 crore.

SBI reported its net interest margin, a metric of profitability for banks, for the April-June quarter at 3.23%, up by 8 basis points on a yearly basis but down 17 basis points sequentially.

Operating profit for Q1 stood at Rs 12,753 crore, down from Rs 18,975 crore during the year-ago period due to mark-to-market losses on investment book.

The public lender reported gross non-performing assets (NPAs) at 3.91%, down 141 basis points on a YoY basis, while net NPA declined by 77 basis points to 1%.

The bank reported 14.93% YoY growth in credit growth while domestic advances grew 13.66% on a yearly basis.