Mumbai: State Bank of India (SBI), the nation's top lender by assets, reported on Friday a small increase in bad loans in its fiscal third quarter that was not as much as feared, sending its shares up as much as 6.8 per cent.
The 208-year old lender, which accounts for about a quarter of loans and deposits in the country, said gross bad loans as a percentage of total loans were 4.9 per cent for the three months to December 31, compared with 4.89 per cent a quarter earlier. Analysts had expected the number to be higher.
Indian lenders have seen a spike in their bad loans in the past two fiscal years which has been mainly attributed to a slowdown in the economy and also in some cases to a lack of due diligence. While economic growth is forecast to pick up this year and next, bad loans will start easing with a lag, bankers say.
SBI Chairwoman Arundhati Bhattacharya has vowed to tackle the increase in bad loans by boosting vigilance and upgrading systems and software. More than two-dozen state-owned lenders, including SBI, account for over 70 per cent of the nation's loans, and the bulk of the bad loans.
SBI's net profit for the quarter rose 30 per cent to 29.10 billion rupees ($468.4 million), from 22.34 billion rupees a year earlier. Analysts on average had expected a net profit of 32.74 billion rupees.
By comparison, most state-run banks have seen their bad loan ratio widening in the December quarter as restructured loans turned sour. Sectors such as infrastructure, metals and mining have shown stress.
SBI is planning to raise as much as 150 billion rupees ($2.4 billion) through a share sale to boost its capital base as Indian lenders gear up for higher capital requirement through March 2019 to comply with global norms. The bank had raised 80.3 billion rupees last year by selling shares to funds.
Shares in SBI, valued at about $35 billion, were trading 5.9 per cent higher by 0708 GMT in a Mumbai market that was up 0.72 per cent. They were on course to post their biggest one-day gain since May last year.
