India’s SBI beats quarterly profit expectations on healthy loan growth

Feb 7 (Reuters) – India’s largest lender, State Bank of India, reported a higher-than-expected profit for the third quarter on Saturday, supported by healthy loan growth.

The state-backed lender posted a standalone net profit of 210.28 billion rupees ($2.32 billion) for the three months ending December 31, compared with 168.91 billion rupees a year earlier.

Analysts had expected a profit of 173.26 billion rupees, according to data compiled by LSEG.

The bank’s net interest income rose 9% to 451.9 billion rupees, aided by a growth in domestic loans, while net interest margin, a key measure of profitability, was flat at 3.12%.

SBI’s loans grew 15.4%, helped by a strong rise in loans to small and medium enterprises and retail borrowers.

Following several quarters of easing credit growth, Indian lenders reported double-digit loan growth in the October–December period, as the year-end festive season and sweeping consumption tax cuts spurred consumer spending.

The bank’s deposits grew 9%.

Growth in SBI’s loan book is seen as an indicator of broader economic trends in Asia’s third-largest economy.

Funds kept aside for potential bad loans and other losses rose nearly five-fold to 45.07 billion rupees.

SBI’s other income, which includes income from treasury, jumped 66% to 183.58 bln.

The Reserve Bank of India has cut policy interest rates by 125 basis points over the last year to spur consumption and investment.

For banks, rate cuts tend to hurt profitability in the short term as lenders typically pass on rate cuts to borrowers quickly, while deposit rates adjust with a lag — squeezing their net interest margins.

SBI’s asset quality improved with gross non-performing asset ratio at 1.57% at the December, improving 50 basis points compared to the year-ago figure.