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After record profit, SBI looks to curb bad loan additions

MUMBAI/BENGALURU (Reuters) - The State Bank of India (SBI), the country’s largest lender, expects to curb growth in bad loans in the current quarter, its chairman said on Friday, after the bank reported its biggest quarterly profit.

A man checks his mobile phones in front of State Bank of India (SBI) branch in Kolkata, February 9, 2018. REUTERS/Rupak De Chowdhuri

A surge in bad loans over the last few years has weighed heavily on the Indian banking sector, exacerbated by the worst slowdown the country has seen in a decade.

“Going forward, there is no big-ticket loan in sight that is likely to slip and corporate slippages are very much under control,” Chairman Rajnish Kumar said on a post-earnings conference call.

Slippages, or fresh additions to bad loans, are not expected to go beyond 60 billion rupees in the March quarter, Kumar added.

That number had nearly doubled to 165.25 billion rupees in the December quarter from a quarter earlier, mainly due to a 70 billion rupee exposure to debt-ridden housing finance giant DHFL.

However, the recovery of 110 billion rupees from bankrupt steel maker Essar Steel helped push SBI’s profit 41% higher to a record 55.83 billion rupees ($785.56 million) in the three months to Dec. 31. Analysts had expected a profit of 63.34 billion rupees, according to Refinitiv data.

SBI’s shares 2.5% higher after the results as investors looked past the profit miss.

Lenders, including SBI, found respite after India’s top court in November allowed ArcelorMittal SA to take over Essar Steel, which was laden with nearly 500 billion rupees in debt from banks.

The recoveries from Essar helped SBI lower its gross bad loan ratio, a measure of asset quality, to 6.94% at December-end from 7.19% in the previous quarter.

Lending, however, is expected to remain weak as companies hold back on borrowing in a slowing economy.

SBI said its credit growth for the current financial year may not exceed 10%, down from its October forecast of 12%.

Quarterly net interest income rose 22.42%, while net interest margin, a key indicator of a bank’s profitability, rose to 3.59%, up 37 basis points from the previous quarter.

Reporting by Chris Thomas in Bengaluru and Nupur Anand in Mumbai; Editing by Shounak Dasgupta and Saumyadeb Chakrabarty