State Bank of India Profit Declines as Bad Loan Provisions Jump

State Bank of India, the nation’s largest lender by assets, posted a 19 percent decline in fourth-quarter profit, missing analysts’ estimates, as provisions for bad debt climbed.

Net income fell to 33 billion rupees ($591 million), or 49.13 rupees a share, for the three months ended March 31, from a record 40.5 billion rupees, or 63.76 rupees, a year earlier, the Mumbai-based lender said in an exchange filing today. The figure, reported on a standalone basis, missed the 37.2 billion-rupee median of 42 analyst estimates compiled by Bloomberg.

Provisions for bad loans and a drop in borrowing costs as the central bank cuts interest rates may erode the lender’s earnings as Asia’s third-largest economy grapples with a decade-low pace of growth, said Nitin Kumar, a Mumbai-based analyst at Quant Broking Ltd. SBI reduced its base rate, the minimum at which it lends, twice in the last nine months.

“Narrowing margins and higher provisions for bad loans may put further pressure on the lender’s profitability,” Kumar said by phone before the earnings were announced. “It is a tough task to cut bad loans in the current economic environment.”

Provisions for nonperforming assets rose to 39.7 billion rupees from 28.4 billion rupees a year earlier, according to the statement.

To contact the reporter on this story: Anto Antony in Mumbai at aantony1@bloomberg.net

To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net

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