State Bank of India, the country's largest bank, said on Thursday its March quarter net profit rose 20 per cent year-on-year on a surge in retail lending in a buoyant economy, but its shares fell as the numbers were below expectations.
The state-run bank said net profit rose to Rs 738 crore (Rs 7.38 billion) in the fourth quarter to the end of March from Rs 616 crore (Rs 6.16 billion) in the same quarter a year earlier.
The median of forecasts in a Reuters poll of 10 brokers was for a net profit of Rs 795 crore (Rs 7.95 billion).
The bank posted a net profit of Rs 3,105 crore (Rs 31.05 billion) for the year ended March, up about 28 per cent from a year earlier.
After the results, SBI's shares were down 1.02 per cent at Rs 348.40, off an intra-day high of Rs 358.85 before the results.
Banks have increased their exposure to retail borrowers to widen interest spreads, and more Indians are now turning to banks, to finance houses and cars as rising incomes and interest rates at three-decade lows stoke spending.
SBI has over 9,000 branches spread across India and overseas, and an asset base of Rs 34,8000 crore (Rs 3.48 trillion). It accounts for a fifth of the country's banking business. "The profit is on the lower side of expectations," said Amnish Aggarwal, analyst at Pranav Securities.
Total income rose to Rs 10,227 crore (Rs 102.27 billion) from Rs 9,040 crore (Rs 90.4 billion) a year earlier, helped by a 55 per cent jump in other income to Rs 2,206 crore (Rs 22.06 billion).
Net interest income rose 18 per cent to Rs 2,767 crore (Rs 27.67 billion), against a forecast of Rs 2,543 crore (Rs 25.43 billion).
At Wednesday's close, SBI's shares had gained 24.5 per cent since the start of 2003, outperforming the Bombay Stock Exchange benchmark index which gained just 1.6 per cent in the same period.
Analysts estimate SBI's retail loans at about 17-18 per cent of its total loan book, but account for a major chunk of its loan growth during the year.
A fall in wages due to a scheme encouraging employees to quit and new low-cost transactions technology would have also boosted the bank's profit, analysts said.
Most Indian banks have reported strong earnings growth in recent quarters due to a sharp rise in retail loans and gains from treasury operations following a sharp fall in bond yields.
But analysts say SBI's performance during the past quarter was boosted more by its core lending business than treasury operations.
Sentiment has also been buoyed by hopes that the government will consider allowing higher foreign fund investments in the company, by removing global depositary receipt holdings from the investment cap.
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