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State Bank of India Falls for 2nd Day on Loan Growth Concern

May 18 (Bloomberg) -- State Bank of India, the nation’s largest lender, fell for a second day after Chairman Pratip Chaudhuri said loan growth may be restricted if the lender faces a cash crunch.

The shares declined 2.4 percent to 2,355.75 rupees, the lowest since July 7, at the 3:30 p.m. close in Mumbai.

State Bank will have to be more selective on lending, Chaudhuri said yesterday after the lender reported lower profit for the fiscal fourth quarter. Loan growth will moderate by up to 3 percent from last year’s levels, Chief Financial Officer Diwakar Gupta told reporters in the eastern Indian city of Kolkata.

Declining capital may hamper attempts by Chaudhuri, who took the helm at the state-owned bank last month, to grow the balance sheet. The bank’s capital adequacy ratio under so-called Basel II standards shrank to 11.98 percent during the quarter from 13.39 percent a year earlier.

State Bank’s stock rating was downgraded to “in line” from “outperform” by Mahruk Adajania, an analyst at Standard Chartered Plc in Mumbai. Punit Srivastava, an analyst with Daiwa Securities Capital Markets cut his recommendation to “hold” from “outperform,” while HSBC Holdings Plc analyst Tejas Mehta downgraded the stock to “underweight” from “neutral.”

Net income dropped to 208.8 million rupees ($4.6 million) for the three months ended March 31, from 18.7 billion rupees a year earlier, the bank said in a filing to the Bombay Stock Exchange yesterday. Loans climbed 20 percent to 7.72 trillion rupees as of March 31, from 6.4 trillion rupees a year earlier.

To contact the reporter on this story: George Smith Alexander in Mumbai galexander11@bloomberg.net.

To contact the editor responsible for this story: Philip Lagerkranser at lagerkranser@bloomberg.net

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