Tuesday 19 / November / 2024
Mumbai: State Bank of India (SBI), the country’s largest lender by assets, posted its third straight decline in quarterly profit as provisions for bad loans almost doubled.
Net income dropped 32 per cent to Rs25.2 billion ($377 million) in the three months ended June 30 from a year earlier, the Mumbai-based lender reported in an exchange filing on Friday. That matched the Rs25 billion average of 23 analyst estimates compiled by Bloomberg. The stock climbed to an eight-month high.
Chairman Arundhati Bhattacharya, whose three-year term at the helm of SBI ends in October, and her peers are battling to reduce surging bad loans that have curtailed their profits. ICICI Bank Ltd., SBI’s largest private-sector competitor, said two weeks ago that provisions for delinquencies more than doubled in the June quarter from the previous year. India’s banking system has the highest soured-debt ratio in 16 years.
"The focus on the recovery of bad loans will continue as the key theme for SBI in coming quarters, even as Bhattacharya passes the baton to her successor,” Siddharth Purohit, an analyst at Angel Broking Ltd. in Mumbai, said before the earnings were released.
India’s government, which holds 60 per cent stake in the bank, has yet to make an announcement regarding the new chairman.
Shares of the lender rose 8 per cent to Rs245.25 at 12:53pm in Mumbai, the highest intraday level since December 2. The stock climbed 9 per cent this year, compared with the 12 per cent gain in the S&P BSE India Bankex Index, which tracks 10 lenders.
State Bank of India shares climbed to an eight-month high in Mumbai stock trading as the firm reported a smaller increase in soured debt than expected in the first quarter.
Bad loans as a percentage of total lending rose 44 basis points since March to 6.94 per cent by June, the Mumbai-based bank reported in an exchange filing. The increase was a fraction of the 116 basis-point surge reported by rival Bank of Baroda on Thursday. SBI said net income in the June quarter sank 32 percent from a year earlier.
Chairman Arundhati Bhattacharya, whose three-year term at the helm of SBI ends in October, and her peers are battling to reduce surging bad loans that have curtailed profits. ICICI Bank, SBI’s largest private-sector competitor, said two weeks ago that provisions for delinquencies more than doubled in the June quarter from the previous year. India’s banking system has the highest soured-debt ratio in 16 years.
"SBI managing to keep a check on surge in bad loans came as a surprise,” said Rethish Varma, head of research at Bengaluru-based Aditya Trading Solutions. "Investors are cheering as they think that the bank has managed to take the bull by the horns and tame it too.”
"The focus on the recovery of bad loans will continue as the key theme for SBI in coming quarters, even as Bhattacharya passes the baton to her successor,” Siddharth Purohit, an analyst at Angel Broking in Mumbai, said before the earnings were released.
India’s government, which holds 60 per cent stake in the bank, has yet to make an announcement regarding the new chairman.
Bank of Baroda, the country’s second-largest state-run bank, reported Thursday a bad-loan ratio of 11.15 per cent as of June 30, up from 9.99 per cent in March. The lender posted a 60 per cent slump in profit for the June quarter from the previous year, as its provisions for soured credit more than tripled.
