SBI Sees Asset Quality Improve Further After Quarterly Profit Beats Estimates

State Bank of India (SBI) on Friday said it expects non-performing asset levels to come down in the short term after it beat expectations with its highest quarterly profit in nearly seven years.

The strong results highlight a recovery at the country's biggest lender by assets, where results have been depressed over the past year by higher provisioning after the central bank tightened rules to tackle record levels of bad debt.

SBI, which accounts for more than a fifth of India's banking assets, saw its gross bad loans as a percentage of total loans ease to 8.71% at end-December, from 9.95% in the previous quarter and 10.35% in the year-ago period.

In absolute terms, its gross bad loans eased from the previous quarter to 1.88 trillion rupees, helped by a slowdown in slippages.

"We are working in the direction of bringing down the net NPA, and with some luck we should be below 3% by the end of March 2019," said SBI Chairman Rajnish Kumar.

As of the end of December, net NPA was at 3.95%, down from 4.84% in the previous quarter.

Net profit came in at 39.55 billion rupees ($556 million) for the third quarter ended Dec. 31, versus a loss of 24.16 billion rupees a year ago, and far ahead of analysts' expectations for a profit of 32.08 billion rupees, according to Refinitiv data.

The results were helped by a 21.3 percent drop in bad loan provisions, a write-back on provisions made for mark-to-market losses, and higher net interest income on the back of healthy growth in loans.

This is the bank's biggest quarterly profit since it reported 40.50 billion rupees in the March quarter of 2012.

Kumar also said the resolution of eight accounts, which is in the "very advanced stage", could generate 340 billion rupees.

"If all these 8 cases get resolved and reach final conclusion within the next two months, then we are looking at a situation where the gross NPA percentage may come down below 7 and net NPA percentage may come down below 3%."

SBI shares, which rose 3.1% after the results, reversed course to close 3.2% lower as bond yields gained after the government unveiled its budget.