| SBI Q1 profit doubles to Rs37.5b on loan growth |
MUMBAI State Bank of India (SBI) posted a second-straight surge in quarterly net profit on strong loans growth, beating street expectations, but a rise in bad loans pulled its shares down.
SBI’s net profit more than doubled to Rs37.52 billion from Rs15.84 billion a year earlier. Analysts, on average, had expected a net profit of Rs36.17 billion.
The results show that government-owned SBI’s efforts to clean up its books since last year are yet to pay off and it is yet to bridge the gap between the quality of its earnings and those of private sector lenders such as ICICI Bank and HDFC Bank.
Government-owned lenders account for 70 per cent of the market in India but their lending decisions are not always driven by commercial considerations. State-run banks last month reported a spike in bad loans for the June quarter, while the private lenders showed stable asset quality.
Its non-performing loans rose to nearly 5 per cent at end-June from 3.5 per cent a year earlier but provisions, or the funds set aside for bad loans and contingencies, were down 41 per cent to Rs25.6 billion.
SBI shares were down 4.5 per cent on Friday afternoon, in a Mumbai market that was down 0.4 per cent.
Net interest income, or the difference between interest earned and interest expended, rose 14.6 per cent to Rs111.19 billion.
Standard Chartered said in a post-earnings note SBI’s new bad loans at end-June were at a record Rs108.4 billion compared to the 55 billion rupees guidance given by the management.
SBI, in which the government owns about a 60 per cent stake, had posted an improvement in its bad debts in the March quarter. Its shares have risen by a third from lows hit in December, about double the broader market’s rise.
But, with a slowdown of India’s economy accelerating and its monsoon rains failing, things might get tricky again.
Earlier in the day UBS downgraded the bank to “sell” from “buy” saying a weak monsoon would add to its already high bad loans. The International Monetary Fund has sharply downgraded growth estimates for India to 6.1 per cent this fiscal year and 6.5 per cent in the next. SBI’s exposure to embattled Kingfisher Airlines and Air India is also causing some nervousness to investors.
Reuters
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