Kolkata: State Bank of India, India’s largest lender, reported a forecast-beating 45.6% rise in quarterly profit after gains from trading trebled and loan demand soared as borrowers scurried for funds in a slowing economy.
Pretax earnings from the bank’s treasury operations, mainly from trading in bonds and other securities, jumped to Rs37.45 billion ($760 million) from Rs12.31 billion in the year to March 2008, it said in a statement.
The bank, which along with its associates controls a quarter of Indian banks’ loans and deposits, did not provide quarterly figures for its treasury operations.
“Our treasury did well. Our treasury, which was a residual one, has come into its own,” chairman OP Bhatt told a news conference.
State Bank, which has 11,000 branches in India and abroad, also gained from robust loan demand of 30% in 2008-09 after it slashed rates on mortgages, car loans and mid-corporate advances under government pressure to boost the economy.
The robust loan growth helped the lender shrink gross bad debts as a percentage of loans to 2.84% in the quarter, from 3.04% a year ago.
Bhatt expected loans and deposits, which jumped 38.1% in 2008-09, to grow by a quarter in the year to March 2010.
“I don’t think this momentum will continue as people will look at investing in the stock market and real estate,” he said.
India’s main share index has risen 23.1% so far this year, after falling a record 52.5% in 2008, as global appetite for stocks increased.
Indian bank loans grew 17.3% in the 12 months to late March, lower than the 30% expansion in the previous three years, central bank data showed. It followed a curb on bank lending due to souring debts.
In value terms, State Bank’s gross bad debts rose 21.4% on the year to Rs155.89 billion in the January-March period as a downturn in the west hit Asia’s third largest economy.
Bad debts or non performing loans are being closely monitored as corporate profits are hit by a slowing economy. Morgan Stanley expects Indian bank’s gross bad debts to rise to 6.1% of advances by 2010-11, from 2.3% in 2007-08.
Private sector rival ICICI Bank, which last month reported a 35.3% fall in quarterly profit, said bad debts as a percentage of net advances in January-March rose to 1.95% from 1.5% a year ago.
State Bank, which raised more than $4 billion through a rights issue in March 2008 will look at raising Rs20 billion this year to fund expansion and meet loan demand.
The bank said January-March net profit was Rs27.42 billion, up from Rs18.83 billion a year ago. That beat a Reuters poll forecast of a net profit Rs21.9 billion for the fiscal fourth quarter.
Net interest margins, a key measure of efficiency, fell to 2.9% in the year from 3.07% as it cut rates.
Shares in State Bank, which the market values at $17.1 billion, have risen 2.9% so far this year compared with a 10% increase in the bank index.
The shares ended 3.1% lower at Rs1,325.15 on State Bank, which has 11,000 branches across India and abroad, has the lowest cost of funds among the nation’s lenders.