Largest Indian Bank’s Profit Beats Estimates on Bad Loans
State Bank of India hasn’t yet accounted for changes in India’s corporate tax rates, which led to a surprise loss.
(Bloomberg) -- State Bank of India Ltd. posted a bigger-than-expected profit in the fiscal second quarter as asset quality improved. Shares jumped.
Net income more than tripled to 30.1 billion rupees ($424 million) for the three months ended Sept. 30 from 9.4 billion rupees a year earlier, India’s largest lender said Friday. Analysts had expected a profit of 22.9 billion rupees on average, according to estimates compiled by Bloomberg.
The Mumbai-based bank’s soured debt ratio narrowed to the lowest in at least a year even as the banking system contended with slow progress in resolving some of the big stressed accounts, such as Essar Steel India Ltd., business tycoon Anil Ambani’s group companies and Dewan Housing Finance Corp. SBI’s gross bad-loan ratio stood at 7.2% compared with 7.53% at the end of June.
“Bad loans seem to be under control for the time being,” said Siddharth Purohit, a banking analyst at SMC Global Securities. “The bank has to keep the non-performing assets under control for another two quarters before investors can put that worry out of their minds.”
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“Provision coverage ratio of 62% creates a resilient bank, a strong bank. If I use the words safest bank in India I would not be exaggerating,” Kumar said. “The lines of the graph are moving in the direction they should be moving.”
Kumar added that State Bank of India hasn’t yet accounted for changes in India’s corporate tax rates, which led to a one-off charge at Axis Bank Ltd. and a surprise loss. SBI will account for the tax changes “before March 2020” and move on to the new tax regime, Kumar said.
Shares of SBI surged 7.3% in Mumbai, the biggest gain in more than a month. The benchmark index rose 0.1%.
--With assistance from Russell Ward and Anto Antony.
To contact the reporters on this story: Suvashree Ghosh in Mumbai at sghosh186@bloomberg.net;Ronojoy Mazumdar in Mumbai at rmazumdar7@bloomberg.net
To contact the editors responsible for this story: Marcus Wright at mwright115@bloomberg.net, Jeanette Rodrigues, Alpana Sarma
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