State Bank of India posts deepest-ever quarterly loss, expects bad loans to drop

(Reuters) - State Bank of India (SBI) reported its deepest-ever quarterly loss on Tuesday, far beyond analyst estimates, due to higher provisions for bad loans, but said it expects a key bad loan metric to fall sharply in two years.

Investors responded to the forecast by pushing up the shares of India’s biggest lender by as much as 6.2 percent, outpacing a 3 percent gain in the Nifty PSU Bank index.

SBI said net loss for the three months ended March 31 was 77.18 billion rupees ($1.13 billion), versus an average 12.85 billion rupee loss from 16 analyst estimates complied by Thomson Reuters. The result also compared with a restated net loss of 34.42 billion rupees in the same period a year earlier.

Management had indicated that the quarter’s results would be “very bad”, so this was largely expected, said A K Prabhakar, head of research at IDBI Capital. “The worst is over for SBI.”

SBI earlier indicated about 500 billion rupees in new bad loans but the actual figure was much less - 336.70 billion rupees, up 30.3 percent on quarter - which has been completely provided for, Prabhakar said.

The Mumbai-based bank expects a compound annual growth rate for credit of 12 percent by 2020, and aims for a gross non-performing advances ratio of under 6 percent by March 2020, Chairman Rajnish Kumar said at a news conference.

Indian banks saw soured loans and provisions surge in the quarter after the central bank in February eliminated half a dozen loan restructuring schemes to hasten the clean-up of near-record levels of bad debt. Most state-run banks that have reported quarterly earnings so far have posted losses.

Gross bad loans as a percentage of total loans rose to 10.91 percent from 10.35 percent three months earlier and 6.90 percent a year prior, the lender said in a statement.

Net interest income for the quarter fell 5.2 percent to 199.74 billion rupees.

($1 = 68.0350 Indian rupees)