By Nishit Navin and Siddhi Nayak
(Reuters) -State Bank of India, the country’s largest lender by assets, beat second-quarter profit estimates on Friday, helped by higher non-interest income but its lending margin shrank.
The state-run lender’s net profit rose 28% to 183.31 billion rupees ($2.17 billion) compared with 143.3 billion rupees a year ago. Analysts expected earnings of 161.89 billion rupees, as per data compiled by LSEG.
The profit beat was primarily due to higher other income and lower operating expenditure, partly offset by higher provisions, Anand Dama, Head of BFSI research at Emkay Global, said.
Banks have been scrambling to raise deposits to meet the rising demand for credit. Increased competition for garnering deposits has pushed banks to either raise interest rates or to slow loan growth, which has hurt margins.
SBI’s domestic net interest margin — a key gauge of profitability — shrunk to 3.27% from 3.43% a year earlier and 3.35% in the previous quarter.
The lender’s non-interest income, which include earnings from investments, jumped 41.5% to 152.7 billion rupees.
Its net interest income, or the difference between interest earned on loans and paid on deposits, increased by 5.4% to 416.20 billion rupees.
Gross loans grew 14.9% on-year in the second quarter, while deposits rose 9.1%.
SBI’s provisions and contingencies rose sharply to 45.06 billion rupees in the quarter, from 1.15 billion rupees a year ago, while provisions for bad loans doubled to 36.31 billion rupees.
Its gross bad loans as a proportion of total loans stood at 2.13% at the end of September, versus 2.21% at the end of June.
Private sector lenders Kotak Mahindra Bank, IndusInd Bank and RBL Bank also raised their provisions towards bad loans in the second quarter, amid rising credit card and microfinance delinquencies.
($1 = 84.3490 Indian rupees)
(Reporting by Nishit Navin and Siddhi Nayak; Editing by Mrigank Dhaniwala)
