State Bank of India the country’s largest lender by assets, reported a higher second-quarter profit on Tuesday, aided by proceeds from its stake sale in Yes Bank, while its lending margin expanded sequentially.
The state-run bank’s net profit rose to 201.6 billion rupees ($2.29 billion) for the three months ended September 30, from 183.31 billion rupees a year earlier.
In September, the lender completed a 13.2% stake sale in Yes Bank to Sumitomo Mitsui Banking Corporation for 88.89 billion rupees.
On account of the transaction, SBI recorded a one-time profit of 45.93 billion rupees for the quarter, boosting its bottom line.
While analysts expected margin contraction and tepid loan growth to hurt overall earnings in the banking sector, Indian lenders have seen a gradual pickup in credit demand in July-September after some quarters of slowdown.
They are expected to see robust credit growth in the second half of the current fiscal year, boosted by recent tax cuts.
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SBI’s net interest income rose 3.3% year-on-year to 429.84 billion rupees, beating the analyst average estimate of 419.73 billion rupees, as per data compiled by LSEG.
Its domestic net interest margin (NIM) contracted 18 basis points year-on-year, but expanded 7 basis points quarter-on-quarter to 3.09%.
Indian lenders faced margin pressure in the first two quarters of the fiscal year that began April 1, due to the central bank’s interest rate cuts. Banks tend to pass on lower rates to borrowers faster than they adjust deposit rates, weighing on profitability.
Analysts said that NIM has bottomed out for Indian banks in the second quarter, expecting an expansion in margins for the second half of the year.
SBI’s gross advances grew 12.7%, while total deposits rose 9.27% in the quarter.
Lenders, such as HDFC Bank and Axis Bank have also posted strong credit growth in the quarter ended September.
SBI’s gross non-performing asset (NPA) ratio improved to 1.73%, compared with 1.83% in the previous quarter.