* Net profit down 35 pct to 23.75 bln rupees vs est. 27 bln
* Net NPL ratio 2.91 pct in September qtr vs 2.83 pct in
* Net new bad loans lower vs previous qtr
(Adds comments from bank's chairwoman)
MUMBAI, Nov 13 State Bank of India (SBI)
posted its steepest quarterly profit fall in more than
two years as nonperforming loans increased, underlining the
difficulties the bank's first chairwoman faces in keeping a lid
on deteriorating assets.
Indian state banks, with their high exposure to the power
and infrastructure sectors, have been hammered by the economic
slowdown. Punjab National Bank, the third-biggest
state lender, posted lower-than-expected earnings last week.
At the same time, helping to fuel speculation that the bad
loans weighing on state banks may be easing, smaller rivals Bank
of India Ltd and Canara Bank Ltd reported a
drop in non-performing assets as of the end of September.
SBI's new chairwoman was less sanguine. "We don't see that
stresses have improved," said Arundhati Bhattacharya, who was
elevated to the top job at SBI last month. "Stress is great on
the mid-corporates side."
SBI said on Wednesday that net profit slumped 35 percent to
23.75 billion rupees ($373 million) in the quarter ended
September. That undershot analysts' average expectations of
about 27 billion rupees.
Net nonperforming loans, as a percentage of total assets,
rose to 2.91 percent, from 2.83 percent in the preceding
Yet shares in SBI rose more than 3 percent in Mumbai trading
as the pace of bad loan growth slowed.
SBI, which accounts for a quarter of India's loans and
deposits, said net new bad loans fell over 39 percent from the
previous quarter. Net interest margin, a key gauge of
profitability for banks, rose to 3.51 percent.
"The guidance generally is that fourth-quarter onwards,
things should improve, but we need to see tangible signs of
that," said Nitin Kumar, banking analyst at local brokerage
"The macro is still challenging, inflation is high, there
could be more interest rate hikes and the ability of banks to
pass on higher costs to borrowers is limited. So, we need to see
sustainable signs of improvement," Kumar said.
The Indian economy is expected to grow 5 percent in the year
ended March, a far cry from near double-digit growth in 2008.
Last month, annual consumer price inflation
quickened more than expected to 10.09 percent from 9.84 percent
in September, driven by food and fuel prices.
Bhattacharya will be under pressure to tame nonperforming
loans and reverse weakening profit growth while helping to
reassure investors who have pulled down SBI's shares by almost
half since a peak in November 2010 as the economy lost momentum.
At the post-earnings media briefing, Bhattacharya declined
to give any earnings guidance for the remaining two quarters of
the financial year.
"I don't believe stressful times are over yet," said P.
Phani Sekhar, fund manager at Angel Broking. "We will see over
the next two quarters how SBI performs and then see where shares
are and if we can add SBI to our portfolio."
The stock trimmed its intraday gains to end 1.44 percent
higher, compared with the 0.43 percent drop in the benchmark BSE
SBI, seeking to raise funds to strengthen its capital base,
has sought government approval to issue additional shares. SBI
has said it needs at least 150 billion rupees, including
retained profit, a year to meet loan demand.
"We have sought approval from the government to raise 8,000
to 9,000 crore (80-90 billion rupees). We will go to the market
once those approvals are in place," Bhattacharya said. "We are
expecting these approvals before March 31."
SBI's plan to raise funds through a rights issue has been in
the works for more than three years, constrained by delays in
government approval and poor market conditions.
The government has already agreed to inject 20 billion
rupees into the bank in the financial year ending in March 2014.
In September, ratings agency Moody's downgraded its outlook
on SBI's financial strength rating to 'negative' from 'stable'
on worsening asset quality and dependence on a fiscally strapped
government to maintain its capital base.
SBI has a board-approved mandate to maintain its tier-I
capital ratio at over 9 percent. The ratio is currently at 8.73
($1 = 63.6375 Indian rupees)
(Reporting by Swati Pandey; Editing by Ryan Woo)