India's two largest banks saw rises in quarterly profit in results yesterday, showing them holding up better than lenders in developed markets despite a steady rise in bad loans.
State Bank of India, the country's top lender, met forecast with a 37 per cent rise in quarterly net profit, while No 2 ICICI Bank posted an unexpected rise in profit, results showed.
Robust loan growth of 28.9 per cent at State Bank, which controls a quarter of Indian bank loans and deposits, helped curb its net bad debt in proportion to net advances, despite signs a downturn in the West is filtering through to India.
State Bank's Chairman OP Bhatt said on Friday the bank should grow by at least a quarter in FY10 and would need up to $4 billion (Dh14.6bn) in capital to meet robust loan demand largely from corporates amid tight liquidity overseas.
Analysts reckon rising bad debts or non-performing loans will be the main risks for Indian banks in the coming quarters as the slowing economy hurts jobs and incomes.
The New York-listed ICICI, which is slowing lending to check rising defaults, saw its bad debts surging to 2.07 per cent of net advances from 1.5 per cent a year ago.
State Bank said its net NPLs rose 22 per cent to Rs68.64 billion (Dh5.1bn) in the quarter ended December from a year ago but fell to 1.36 per cent from 1.44 per cent as a percentage of net advances.
State Bank's treasury income, primarily from trading in bonds, climbed 51.4 per cent to Rs60.04bn after bond yields tumbled 337 basis points in the quarter as the central bank slashed key rates. Bond prices move inversely to yield.
The bank said net profit rose to Rs24.78bn in the fiscal third quarter from Rs18.09bn a year ago. A poll had forecast a net profit of Rs24.7bn.
State Bank said it had provided Rs7.5bn to cover for pension liabilities as government bond yields fell.
Net profit at ICICI, which named NS Kannan – presently a executive director at its life insurance joint venture with UK's Prudential – as chief financial officer, was Rs12.72bn in the quarter above Rs12.3bn and a poll forecast of Rs10.7bn.
Profits at ICICI, which bore the brunt of investor and depositor concerns about its exposure to global financial crisis in the September quarter, were largely driven by treasury income, which more than trebled to Rs9.76bn amid flat interest and other income.