State Bank of India, the country's top lender, expects loan growth and margins to revive as corporate confidence in Asia's third largest economy boost credit demand. On Saturday, the state-run lender posted a 10.2 percent rise in September quarter net profit to 24.9 billion rupees ($530.2 million) on trading gains as core operations suffered on slipping loan demand and low lending rates.
A Reuters survey of analysts had forecast net profit at 24.6 billion rupees. On Friday, closest rival ICICI Bank said quarterly net profit rose 2.6 percent, beating forecast. Rising business confidence in Asia's third-largest economy is expected to bring back corporate, housing, auto and retail demand helping Indian banks boost sagging loan growth. "Loan growth was slow until June. After that it has picked up significantly and if the rate of growth continues we should be able to meet our targets," Chairman O.P. Bhatt told reporters.
Advances grew 16.4 percent in July-September, lagging its 30 percent surge over the past few years but ahead of the 13 percent sector growth, said State Bank, which along with its associates controls almost a quarter of Indian bank loans and deposits.
But it expected to reach credit growth of 22 percent in the year to March 2010, Bhatt said. Most Indian corporates have beat earnings estimates in the September quarter, trimming the risk of rising bad debt for Indian banks. Bad debts for State Bank, which has 12,000 branches across India and abroad, have risen 2.99 percent in the fiscal second quarter compared with 2.79 percent in the June quarter. It also said provisions for bad debts fell to 42.9 percent in July-September compared with last quarter's 45.2 percent.
EYEING GROWTH Net interest margin grew to 2.55 percent in the quarter to September compared with 2.3 percent in the previous quarter. The bank sees net interest margin nudging up 10 to 15 basis points in the next few quarters as it is increasing low-cost deposits and cutting high-cost term deposits.
The bank's capital adequacy ratio, a measure of its financial efficiency, stood at 12.47 percent from 12.14 percent a year ago. State Bank of India would need about 360 billion rupees over the next 5 years to maintain a capital adequacy ratio of 12 percent, its Chief Financial Officer S.S. Ranjan said.
Bhat said the absorption of its unit State Bank of Indore was on track and the board has approved the share swap ratio, but he refused to elaborate further. State Bank has said it was looking at acquisition opportunities overseas to strengthen its portfolio. "We are looking at it but in the current climate it is difficult. If you make a mistake it won't be good for us in the context of what has happened across the world," Bhatt said referring to the global credit crisis.
State bank earns just a tenth of its profits from its overseas operations. Shares of State Bank, valued at $31.5 billion, rose 26 percent in July-September, beating a 20 percent rise in the sector index and an 18 percent gain on the benchmark index.
Comments
Comments are closed.