SBI Net Up 30%, Bad Loans Surge

09 Nov,2012 10:05 IST

SBI Net Up 30%, Bad Loans Surge

Bank posts smallest profit growth this year as asset quality deteriorates

State Bank of India (SBI), the country's biggest lender, posted its smallest profit increase this year as bad loans constrained earnings growth, sending its shares lower.

Problem lending has risen to a record as India's worst economic slowdown in almost a decade clouds the outlook of the country's banks including SBI, which accounts for a quarter of all loans and deposits.

The state-owned bank, which has exposure to debt-laden firms such as Kingfisher Airlines Ltd, Air India Ltd and Deccan Chronicle Holdings Ltd, said bad loans rose to 5.15 per cent of its loan book as of the end of September from 4.19 per cent a year earlier.

Net profit for the quarter ended September 30 increased about 30 per cent from a year earlier to Rs 3,658 crore. That compares with a more than doubling in net income in the previous quarter.

Analysts, on average, had expected a net profit of Rs 3,569 crore, according to Thomson Reuters I/B/E/S.

Shares in SBI fell as much as 3.77 per cent in Mumbai trading, the biggest decline in a week. As of 0715 GMT, the stock was down 2.64 per cent at Rs 2,183.1, compared with a 0.42 per cent drop in the Sensex.

SBI has been aggressive in identifying bad loans and making adequate provisions since Chairman Pratip Chaudhuri took reins of the bank in 2011. Still, problem loans at the bank are the highest in the industry. That, coupled with low capitalisation, prompted ratings agency Moody's to downgrade the bank last year.

Bad loans increased by nearly 45 per cent to Rs 492 crore in the September quarter compared with a year earlier, SBI said.

Net interest income, or the difference between interest earned and interest paid out, rose nearly 63 per cent during the period.

Large state-owned banks such as Punjab National Bank and Canara Bank Ltd earlier posted drops in net profit and a spike in bad loans in the fiscal second quarter, hurt by the economic slowdown.

The bank, however, showed signs of stress on asset quality as the gross non-performing assets ratio jumped to 5.15 per cent from the year-ago period of 4.19 per cent.



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