Bucking the trend of lower profits and higher bad loans by public sector banks, the country’s largest lender State Bank of India posted a 30 per cent rise in net profit, at ₹2,910 crore, in the October-December quarter.
The profit was driven by improvement in asset quality, higher non-interest income and stable corporate loan growth.
“We have done a lot of hard work with individual follow-ups, account by account, to get resolution of bad assets. We have also strengthened our teams and now will do a mega auction of ₹1,200-crore assets on March 14,” Arundhati Bhattacharya, Chairperson and Managing Director, SBI.
However, she added that it will be a couple of quarters more before the bank can say the (bad loans) pain is over.
Net interest income (different between interest earned and expended) rose 9 per cent, while non-interest income jumped 24 per cent to ₹5,238 crore on account of profit on sale of investments.
Corporate loans grew 20 per cent as against muted growth recorded by other public sector banks.
While retail loans rose 13 per cent, lending to the mid-corporate and small and medium sectors witnessed a marginal de-growth.
Gross non-performing assets (NPAs) as a percentage of total advances improved to 4.90 per cent in Q3 FY15 from 5.73 per cent in the year-ago period. Sequentially, it remained almost flat (4.89 per cent in the previous quarter).
The profit growth was contained due to higher provisioning for bad loans, which increased 26 per cent year-on-year (up 22.5 per cent sequentially) to ₹5,235 crore.
Restructured loans The bank restructured ₹1,454 crore worth assets during the quarter with the total restructured assets standing at ₹66,704 crore as at December-end 2014. The bank expects assets aggregating about ₹5,500 crore to be restructured by March-end.
The SBI also sold ₹454-crore assets to asset reconstruction companies and is likely to sell more, going forward.
On interest rates, Bhattacharya expects another rate cut by the RBI before March-end. However, banks, she said, may wait to cut lending rates as cost of funds still remains high.
Shares of SBI jumped 7.9 per cent (₹22.65) over the previous close to end at ₹307.05 apiece on the BSE on Friday.