SBI Q1 net drops 45.6%

SBI Q1 net drops 45.6%

Mumbai: India’s top lender State Bank of India (SBI) posted a 45.6% fall in June quarter net profit, falling short of estimates due to higher provisions.

SBI said net profit in April-June fell to Rs1,584 crore ($349 million) from Rs2,914 crore a year ago. Net interest income was Rs13,124 crore, compared with Rs10,351 crore a year ago.

A Reuters poll of analysts had forecast net profit of Rs1,760 crore.

Public sector banks face higher provisioning costs and deteriorating asset quality under new rules that require them to be more stringent in recognizing non-performing assets (NPAs).

Last month, the country’s second largest lender, ICICI Bank, posted a 30% growth in net profit, but missed estimates as higher expenditure offset strong credit growth and lower provision for bad loans.

Most banks have seen a drop in net interest margins -- a key gauge of profitability for banks -- on a sequential or year-on-year basis due to higher borrowing costs, but pressure on margins could ease in the coming quarters as banks pass on lending rate increases to customers.

The Reserve Bank of India (RBI) raised its key lending rate by a surprise 50 basis points last month to fight inflation. It also cut credit growth forecast for banks to 18% from 19% projected earlier.

Shares of SBI, valued at $30.7 billion, closed 2.2% lower at Rs2197 on Friday.