State Bank of India reported a net profit of Rs 3,263 crore for the quarter ended December 2011, up 15 per cent from Rs 2,828 crore in the corresponding year-ago quarter. The increase in profit was on account of a robust rise in net interest income, which touched an all-time high and improvement in net interest margins.

Profits grew despite an increase of over Rs 1,300 crore in loan loss provision and an over Rs 800-crore depreciation in investment on account of losses in the equity portfolio, said Mr Pratip Chaudhuri, Chairman, SBI.

“The bank is back on a consistent growth path,” he said.

The bank increased loan loss provisions by 84 per cent to Rs 3,006 crore (Rs 1,632 crore).

However, asset quality for the country's biggest bank still remains a concern, with gross non-performing assets touching Rs 40,098 crore as on end December, from Rs 23,438 crore in the ‘year-ago' period.

Fresh slippages to NPAs in the third quarter were to the tune of Rs 8,161 crore.

‘Worst is over'

“We think the worst is over with regard to NPAs. NPAs have plateaued. The biggest hit was from one aviation company, which accounted for about Rs 1,200 crore of the NPAs. But we could expect some improvement in the sector following the proposal to allow FDI and direct import of fuel,” Mr Chaudhuri said.

The highest share in NPAs was from the agriculture sector, which contributed 9.45 per cent. SME's share was 7.9 per cent, mid-corporate was 5.54 per cent and large corporate was at 1.1 per cent. However, strong growth in margins will make it easy to absorb the NPAs, Mr Chaudhuri said.

NIM for December was 3.82 per cent, higher than the guidance of 3.65 per cent. Shedding high-cost deposits and eliminating the dependence on Certificates of Deposits, which come at a high cost, helped the bank improve its NIM.

Credit growth

The demand for credit is muted, said Mr Chaudhuri, although there is very high demand for dollar credit. This year the bank hopes to meet its guidance of 16 per cent growth in credit. The bank may cut interest rates in some loan segments, such as educational loans, but not the Base Rate, Mr Chaudhuri said.

On a consolidated basis, net profit increased to Rs 4,318 crore (Rs 3,710 crore), a growth of 16 per cent.

For the April-December nine-month period, net profit was down to Rs 7,657 crore (Rs 8,244 crore), because the first quarter of the fiscal was a tough one, Mr Chaudhuri said.

Shares of SBI closed at Rs 2,129 crore — down 2 per cent from its previous close on the BSE.