State Bank of India’s Second-Quarter Earnings Miss Estimates

State Bank of India, the country’s largest lender by assets, posted second-quarter profit that missed analysts’ estimates as loan growth slowed and provisions for soured debt rose.

Net income climbed 31 percent to 31 billion rupees ($503 million), or 41.5 rupees a share, for the three months ended Sept. 30, from 23.8 billion rupees, or 34.7 rupees, a year earlier, the Mumbai-based lender said in an exchange filing today. That missed the 32.4 billion-rupee median of 33 analyst estimates compiled by Bloomberg.

India’s economic growth cooled off to less than 5 percent in the past two fiscal years, underscoring challenges for Chairman Arundhati Bhattacharya as she aims to boost lending and cut soured debt. The government’s forecast for the economy to strengthen may signal a brightening outlook for the lender.

“Slowing loan growth and higher provisions for bad loans weighed down on profitability,” Vishal Narnolia, a Mumbai-based banking analyst at SMC Global Securities Ltd., said by telephone. “As the asset quality hasn’t deteriorated from the June quarter, we expect higher profit growth from next quarter onwards.”

Shares of SBI climbed 1.8 percent to 2,770 rupees at 1:16 p.m. in Mumbai trading, extending this year’s advance to 57 percent. The S&P BSE India Bankex Index, which tracks 12 lenders, gained 54 percent in 2014.

Bad-Loan Provisions

The bank’s gross bad-loan ratio remained little changed from the end of June at 4.9 percent, the filings showed. Provisions for non-performing assets doubled to 40.3 billion rupees in the quarter, from 26.5 billion rupees a year earlier.

The lender doesn’t expect bad debts to surge in coming quarters, Pradeep Kumar, a managing director who heads State Bank of India’s corporate banking operations, said Sept. 30. He leads a panel that tries to recover stressed loans of as much as 5 billion rupees each, while Bhattacharya helms a panel for higher amounts.

The company is pushing large corporate borrowers that have defaulted or are under stress to make repayments to the bank by tapping equity markets and selling non-core assets, Kumar said in September.

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