Banking behemoth - State Bank of India's (SBI) third quarter net profit rose at a slower pace by only 4 percent year-on-year to about Rs 3,400 crore on the back of lower net interest income (or the difference between interest earned and paid out), which declined nearly 3% Y-o-Y to Rs 11,154 crore during the same period.
Analysts on an average had estimated a 10 percent profit growth while NII was expected to fall by 1% Y-o-Y for the quarter.
Other income zoomed more than 75% Y-o-Y to Rs 3,648 crore. Net interest margin (NIM) contracted marginally from 3.77% in Q2 to 3.72% in Q3, 2012-13.
India's largest lender expanded its loan book nearly 16% to Rs 9.78 lakh crore. Gross non-performing asset ratio increased to 5.30% (at Rs 53,460 crore) as against 5.15% in the July-September quarter, suggesting that asset quality pain is not yet fully over. Net NPA ratio increased to 2.58% compared with 2.44%. However, both ratio improved when it is compared year-on-year basis.
Accordingly, provisions for bad loans upped 46 percent quarter-on-quarter to Rs 2,766 crore. The same was at Rs 3,000 crore (excluding a write-back of investment provision at Rs 870 crore) a year back.
Provision coverage ratio (PCR) has been falling since the start of financial year 2012-13. PCR fell to 61.49 percent as on December 31 from 62.78 percent as on September 30 and 68.10 as on June 2012.
"Lower NII is not much of a concern while the rise in fresh slippages (NPAs) is," Vaibhav Agrawal, vice president-research at Angel Broking told moneycontrol.com.
"Over the last one year, the bank has been aggressively cutting its base rate, which has impacted its interest margin. Its strong CASA base will help protect its interest margin. However, we need to see whether the lender manages to control its NPAs next quarter. Ideally, those should improve," he said.
At a time when most of the banks are struggling to garner public deposits - a cheap source of funds, SBI increased its deposits nearly 16% Y-o-Y to Rs 11.56 lakh crore. Its current and savings account (CASA) ratio stood at around 45%. The bank pays 0-4% interest on CASA as against 7-9% offered in term deposits.
During the quarter, SBI's capital adequacy ratio declined to 12.21 percent as against 12.63 percent in the previous quarter.