* Q3 net at 22.34 bln rupees vs 25.3 bln consensus
* Q3 non performing loans rise to 5.7 pct
* Focusing on problem of rising defaults, cost control-
(Adds executive comments, context)
By Swati Pandey
MUMBAI, Feb 14 State Bank of India (SBI)
said on Friday it would boost vigilance of bad loans
after the country's largest lender disappointed analysts and
posted a fourth consecutive quarterly drop in net income.
Like state-run peers Punjab National Bank, Canara
Bank and Bank of India, SBI's profits have
been clipped by an increase in defaults by companies battling
reduced cash flows, high inflation and delays in government
approvals for projects.
To avoid a further worsening in its asset quality, SBI will
conduct weekly reviews, and install new technology, to quickly
identify loan accounts showing signs of stress, Chairwoman
Arundhati Bhattacharya told reporters.
"We will do a better management of what we have and have
much better processes in place to pick and choose. We will have
much better early warning signals," she said.
SBI posted a 34 percent drop in third quarter net profits to
22.34 billion rupees ($358.21 million) in the quarter ended
December, lagging analysts' estimate of 25.3 billion rupees.
Net interest margins, a key gauge of profitability, were
largely unchanged at 3.51 percent from 3.49 percent in the
Gross non-performing loans as a percentage of total assets
rose to 5.7 percent from 5.6 percent in the previous quarter.
"Revenue and loan growth numbers have come in-line but
nobody is talking about growth anymore. The entire focus is on
asset quality," said Manish Ostwal, banking analyst at KR
Choksey Shares & Securities.
SBI, which accounts for a quarter of India's loans and
deposits, saw a tepid response from foreign investors for a
$1.28 billion share issue last month largely because of concerns
about its asset quality and earnings growth in a slowing
NO RECOVERY IN SIGHT
SBI chairwoman Bhattacharya, who took office last October,
is under pressure to tame non-performing loans and reverse
weakening profit growth while helping to reassure investors who
have dragged down the bank's shares by almost half from their
peak in November 2010.
Bhattacharya said the bank had restructured outstanding
loans worth 561 billion rupees as of the end of December, about
61 percent higher from a year ago.
Bad debts, however are likely to rise. Last month, India's
top private sector lender ICICI Bank warned that
corporate defaults would rise in the next few quarters. ICICI
posted its slowest profit growth in four years in the December
SBI Chief Financial Officer R.K. Saraf also said he expected
the banking sector's loan problems to linger as India's economy
grows at its slowest pace in a decade.
"Mid corporates neither have the resources nor the
management bandwidth nor the wherewithal to face a prolonged
slowdown like this," Saraf told reporters. "We feel, going
forward, this stress will continue for some time."
Ratings agency Fitch expects stressed assets at Indian
banks, as well as bad and restructured debt, to total 14 percent
of loans by March 2015, up from 9 percent in March 2013.
SBI shares, valued at about $17 billion, closed down 1.7
percent at 1,475.10 rupees in a Mumbai market that
closed 0.9 percent higher.
($1 = 62.36 rupees)
(Writing by Prashant Mehra; Editing by Miral Fahmy)