State Bank of India Net Increases 14%, Beating Estimates, on Loan Demand

State Bank of India, the nation’s largest lender, posted third-quarter profit that beat analysts’ estimates as accelerating economic growth boosted loan demand.

Net income rose to 28.3 billion rupees ($619 million) for the three months ended Dec. 31, from 24.8 billion rupees a year earlier, the Mumbai-based bank said in an e-mailed statement. The profit compared with the 27 billion-rupee average of 29 estimates compiled by Bloomberg News.

The profit gains may help Chairman Om Prakash Bhatt meet a target of 18 percent credit growth for the year ending March 31, when his five-year term at the helm ends.

Analysts at brokerages including Macquarie Research’s Suresh Ganapathy said the earnings were better than expected, but sustaining the growth will be difficult.

“On both margins and asset-quality fronts, the bank has positively surprised,” Ganapathy said by telephone today.

The lender, which accounts for almost a fifth of India’s banking assets, plans to raise 200 billion rupees from a rights offer by March 31 as it seeks more funds to lend to companies.

The bank’s shares rose 2.4 percent to 2,596.9 rupees yesterday.

Deposit Growth

Net interest income, or revenue from borrowers after deducting interest paid to depositors, widened 43 percent to 90.5 billion rupees from 63.2 billion rupees a year earlier. The net interest margin, a measure of lending profitability, grew to 3.4 percent from 2.56 percent.

State Bank’s deposits climbed 14 percent to 8.79 trillion rupees from 7.71 trillion rupees a year earlier. The lender has increased the interest rate it pays for the funds four times since August.

The bank posted a pretax loss of 7.25 billion rupees from trading in bonds and currency in the quarter, compared with a shortfall of 935.4 million rupees a year ago.

State Bank appears set to be able to meet the central bank’s provision for bad loans, said Sampath Kumar, an analyst at IIFL Ltd. The bank’s provisions for bad loans widened to 64.07 percent as of Dec. 31, from 62.78 percent on Sept. 30, according to the statement.

ICICI Bank Ltd., India’s largest non-state bank, reports its quarterly results on Jan. 24.