State Bank of India quarterly profit rises over 14% on lending and stake sale

what happened

According to Reuters, State Bank of India's second-quarter profit climbed by more than 14%. Strong demand for loans and a one-time gain from selling part of its holding in SBI Funds Management helped drive the result. The country's biggest lender by assets booked net profit of 230.38 billion rupees, or $2.43 billion, for the period ended September 30, versus 201.60 billion rupees a year before.

Credit expansion across Indian banks was firm during the September quarter, with corporate borrowing, including loans to small and medium enterprises, and retail demand for home and vehicle loans both holding up. Lenders also pulled in roughly $133 billion of foreign-currency deposits from non-resident Indians under a special Reserve Bank of India program, which boosted deposits and supplied funding for new loans.

SBI's net interest income rose 14.7% to 491.43 billion rupees. The gain from selling about 6% of SBI Funds Management, including a pre-IPO placement, came to 72.88 billion rupees. Separately, the bank said proceeds from its sale of a 0.65% stake in NSE during the exchange's IPO went to capital reserve rather than the profit and loss account. The report used an exchange rate of 94.8225 rupees per dollar.

why it matters

The strong result at India's largest lender points to healthy credit demand and deposit inflows across the country's banking sector. Part of the gain, however, came from one-time stake sales, so investors may want to look separately at how core operating profit is developing.

market impact

Indian banks: strong profit and loan growth support the sector

• ▲Indian bank shares pressure up — strong loan growth and deposit inflows support lender earnings

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