State Bank of India, India’s largest lender and a bellwether for the economy, on Friday beat market expectations with a 25% year-on-year rise in net profit to Rs 3,879 crore during the quarter, against Rs 3,100 crore a year ago, led by higher advances and a fall in bad loans.
Analysts had expected SBI to report a net profit of Rs 3,639 crore.
Net interest income grew 7.3% to Rs 14,253 crore during the quarter from Rs 13,275 crore last year.
SBI’s interest income on advances, one of the key sources of revenue for banks, rose 4% to Rs 28,982 crore during the quarter, slowed mainly due to the reduction in the base rate or minimum lending rate twice by 15 basis points each in
April and June.
Gross non-performing assets (NPAs) — loans that do not yield returns — fell from Rs 60,712 crore in September 2014 to Rs 56,834 crore in September 2015, a 6.39% fall.
In a further sign of improvement, SBI said it saw a faster growth in mortgage and auto loan books, helping it offset slower loan growth to small companies and bolstering its plans to hit a loan growth target of 14% in 2015-16.
State-owned banks have been grappling with their worst bad debt burden in a decade, with bad loans rising mainly due to stalled projects. Sectors such as steel and power are seeing the maximum number of loans turning sour.
“I think we are beginning to see the end of this entire cycle... Today, I am much more confident about the quality of assets going forward,” SBI chairman Arundhati Bhattacharya said.
“State-run banks that have slowed down lending are seeing improvement in asset quality: you have to be conservative in a bad environment,” said Vaibhav Agarwal, vice-president, research, Angel Broking.
SBI’ shares rose 3.86% on the BSE on Friday.
(with agency inputs)