BENGALURU: State Bank of India, the country’s largest lender, on Friday said its quarterly profit surged a better-than-expected 68.5% to a record high, boosted by better interest income and a drop in bad loan provisions.

Strong economic activity post the pandemic and recent festive-season spending has boosted credit demand in India, feeding both retail and corporate loan growth at the bank.

Net interest income - the difference between interest earned and paid - rose 24% to 380.69 billion rupees, while net interest margin, a key indicator of banks’ profitability, rose to 3.69% from 3.40% a year ago.

Credit growth at state-owned SBI stood at 17.6%, with around 18% growth seen in retail and corporate loans each.

Deposits at state-owned SBI grew 9.51%.

Net profit rose to 142.05 billion rupees ($1.74 billion) from 84.32 billion rupees a year earlier, beating analysts’ estimates of 131.01 billion rupees, according to Refinitiv IBES data.

Indian banks have seen their bad loans clear up over the past few quarters as the pandemic abated and loan recoveries picked up.

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Last month, private lenders HDFC Bank, Axis Bank and ICICI Bank posted better-than-expected profits, on strong loan growth.

For SBI, gross bad loans as a ratio of total loans, a measure of asset quality, eased to 3.14% from 3.52% a quarter earlier.

Net bad loans slipped to 0.77% while provisions for bad loans nearly halved to 15.87 billion rupees.

Shares of state-run lenders surged 70% last year as analysts turned bullish, though concerns about bank exposure to the embattled Adani Group have slammed the sub-index in the past two weeks.

SBI shares closed 3.1% higher ahead of the results.