SBI shares jump 7% as bad loans rise less than expected

State Bank of India (SBI) on Friday reported 31.7% decline in profit to Rs 2,520.96 crore as provisions for bad loans continued to eat into profits.

Its gross bad loans rose only 3% over the preceding quarter to Rs 1.02 lakh crore as of end-June, much less than expected. This led to the share price closing 7.16% higher at Rs 243.20.

The fresh slippages during the quarter were over Rs 8,000 crore, a sharp fall from the over Rs 30,000 crore of fresh slippages from the preceding quarter.

The bank maintained its watch list at Rs 31,000 crore and during the quarter, about Rs 700 crore outside the watch list also slipped into NPAs.

Arundhati Bhattacharya, chairman, SBI, said in a press conference, "We are still looking at bad loan resolutions pick up pace. Resolutions have started but they have not picked up pace to that extent and especially in respect of larger accounts. We really need to see much more improvement. It should pick up from third quarter onwards. It still is too early to give a target for non-performing loan ratios for the end of the year."

She added that lending rates would come down once the credit growth picks up but the first quarter being a lean season, it is difficult for banks to pass on rate cuts. "But once the demand picks up, it will be easier to bring down rates as volumes will make up for lower yield on advances."

Total interest income increased by 4.92% to Rs 41,594 crore and the net interest income (NII) increased by 4.23% Rs 14,312 crore.

Non-interest income increased by 44.16% to Rs 7,335 crore. This was driven by profit on sale of investments, recovery in written off accounts and increase in fee and forex income.

State Bank of India