Mumbai: Shares of Indian Bank Ltd jumped nearly 20% on Tuesday after the state-run bank reported a 43% increase in its fiscal first quarter profit, beating analysts’ estimates.

Net profit rose to 307.36 crore in the quarter ended 30 June from 215.28 crore a year ago on higher net interest income and lower employee cost.

A Bloomberg poll of seven analysts had estimated a net profit of 148.70 crore.

Operating profit increased by 27% from a year earlier to 903.18 crore.

Net interest income, or the core income a bank earns by giving loans, increased 10.4% to 1,236.32 crore in the June quarter from 1,120.33 crore last year. Other income increased 17.6% to 441.67 crore from 375.57 crore in the same period last year. Employee cost fell 8.4% to 485.59 crore.

Gross non-performing assets (NPAs) rose 0.76% to 8,894.24 crore at the end of the June quarter from 8,827.04 crore in the March quarter. On year-on-year basis, gross NPAs jumped 53% from 5,815.15 crore. As a percentage of total loans, gross NPAs stood at 6.97% at the end of the June quarter, compared with 6.66% in the previous quarter and 4.65% in the year-ago quarter.

Fresh slippages were just 825 crore for the first quarter compared with 3,387crore a quarter ago.

Net NPAs stood at 4.48% in the June quarter compared with 4.2% in the previous quarter and 2.62% in the same quarter a year ago.

Despite the deterioration in asset quality, the bank didn’t make higher provisions. Provisions and contingencies fell 49% to 416.99 crore in the quarter from 813.58 crore in the March quarter. On a year-on-year basis, provisions rose 2.2% from 408.07 crore.

As a result, its provision coverage ratio dropped to 53.89% as of 30 June from 60.9% a year ago.

Shares of Indian Bank closed 19.97% up at 186.20 on BSE, while the benchmark Sensex declined 0.08% to 27,981.71 points.

“Within public sector banks, it has done the best so far especially when we look at the fresh slippages numbers. Asset quality has improved a lot. It is the best stock to buy within public sector banks," said Ashutosh Mishra, banking analyst at Reliance Securities Ltd.

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