(MENAFN- Khaleej Times) The State Bank of India, the country's largest by assets, posted first-quarter profit that dropped more than analysts estimated as bad loans climbed amid a slowdown in Asia's third-largest economy.
Net income fell 14 per cent to Rs32.4 billion ($534 million), or Rs47.38 a share, for the three months ending June 30, from Rs37.5 billion, or Rs55.91, a year earlier, the Mumbai-based lender said in an exchange filing on Monday. That compared with the Rs34.2 billion average of 42 estimates compiled by Bloomberg.
Shares of State Bank fell to their lowest in more than a year and a half on concern that more defaults may erode profit as the economy slows. The Reserve Bank of India's measures starting last month to halt a slide in the rupee by curtailing money supply may weaken the pace of expansion in India, where output grew last year at the slowest rate in a decade.
"Asset quality remains the major concern," Vishal Narnolia, a Mumbai-based banking analyst at SMC Global Securities Ltd, said by telephone. "The profits from investments in stock and government debt weren't enough to make up for the surge in bad loans."
State Bank on Monday was the worst performer on the S&P BSE Bankex index, which tracks 13 lenders. The shares, which have dropped 32 per cent this year, fell 3.1 per cent as of 3:03 pm to Rs1,612.20, the lowest in intraday trading in Mumbai since January 2012. That compared with a 1.1 per cent gain in India's equity benchmark S&P BSE Sensex index on Monday.
Total outstanding loans at SBI increased by 16 per cent to Rs11 trillion at the end of June. Credit growth at Indian banks decelerated to 13.7 per cent in the twelve months to June 28, the slowest pace since 2009, data compiled by the RBI shows.
The bank will focus on lending to individuals as the demand for credit from companies is falling, Chairman Pratip Chaudhuri said in an interview in May. The lender is also taking measures to bring down soured debt by offering incentives to employees who recover bad loans, Chaudhuri said.
State Bank's gross bad loans expanded to 5.6 per cent of the total by the end of June, from almost five per cent a year earlier, the filing showed. The measure at ICICI Bank Ltd, the second- largest by assets, was 3.23 per cent as of June 30.
Net interest income, or revenue from lending minus payments on deposits, rose 3.5 per cent from a year earlier to Rs115 billion.
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