New Delhi: Shares in State Bank of India hit a record after profit at the nation’s largest lender beat estimates, helped by big write-backs and fewer provisions for bad loans.
Net income in the second quarter jumped 67% to 76.3 billion rupees ($1.02 billion) in the quarter ending September, according to a statement Wednesday. That exceeded the average estimate of 66.5 billion rupees from 16 analysts in a Bloomberg survey.
Shares ended 1% higher, the only bank to gain in a broader banking gauge of 10 lenders that was down 1.3% in Mumbai.
India’s largest bank joins local peers in posting strong results following a surge in retail lending due to low interest rates and festive discounts. SBI, which controls a fifth of the country’s loan market, is a key barometer of the nation’s financial health and its growth plans play a key role in the economy’s revival.
SBI’s retail loan book grew 15.2% from a year ago, driving its overall advances due to high festive demand. However, loans to companies shrank about 4% during the quarter. About 50% of its sanctioned loans to large businesses are not disbursed while 27% of term loans are yet to be availed, SBI Chairman Dinesh Khara said in a post-earnings call.
“We are waiting for the corporates to come back,” Khara said. “We expect corporate demand for loans to pick up by end of the current and next quarter.”
SBI’s asset quality and overall lending metrics have been relatively good compared with other state peers. The lender’s bad loan ratio narrowed to 4.9% in the three months to September from a 5.32% rise in the previous quarter. It set aside 1.89 billion rupees in provisions during the quarter, down from the 100.5 billion rupees in the three months earlier and 101.2 billion rupees a year ago.
SBI wrote back 40 billion rupees on its exposure to bankrupt Dewan Housing Finance Corp., Khara said. Dewan was taken over by Piramal Enterprises Ltd. after the shadow lender had failed last year.- Bloomberg