SBI March quarter net falls, says asset quality improved

State Bank of India (SBI), the nation's top lender, reported its fifth consecutive quarter of declining profit but said its asset quality improved, sending its stock more than 5 per cent higher.

The PSU bank, which accounts for about a quarter of India's loans and deposits, said standalone net profit fell about 8 per cent from a year earlier to Rs 30.41 billion ($519.8 million) in the fourth quarter ended March 31, 2014.

The net profit was ahead of analysts' estimates of Rs 28.03 billion.

Lenders in India are betting that a new government that is set to take over next week will help revive an economy facing its worst slowdown since the 1980s, spurring loan growth and checking a rise in bad loans.

India's economic growth has almost halved to below 5 per cent in the past two years on weak investments and consumer demand. Investors hope that the new government, led by Narendra Modi, who is seen as a pro-business leader, will speed up reforms and give faster clearance to big-ticket projects.

SBI, which has pledged to boost vigilance of bad loans after a string of disappointing results, said net non-performing loans as a percentage of total assets fell to 2.57 per cent in the March quarter from 3.24 per cent in the preceding quarter, but were still higher compared to 2.10 per cent in the year-ago quarter.

Net interest income rose 16.5 per cent from a year earlier to Rs 110.78 billion, SBI, whose majority shareholder is the Indian government, said in a statement. Domestic net interest margin, a key gauge of profitability, was stable at 3.49 per cent, the bank said.

Indian banks including SBI are expected to tap markets to raise funds to meet capital rules and shore up their battered balance sheets.

An external Reserve Bank of India panel said this month that state lenders will need up to $98 billion in tier 1, or core capital by March 2018.

SBI saw a tepid response from foreign investors for a $1.28 billion share sale in January, largely because of concerns about its asset quality and earnings growth in a slowing economy.

Shares in SBI, valued at more than $32 billion, rose as much as 5.6 per cent after the results. The stock has surged almost 50 per cent so far this year, while the NSE bank index has risen nearly a third on hopes of a recovery in the fortunes of the sector.

(Reuters)