India’s largest bank records an incredibly huge jump in profits after generous government support.
Net income for the State Bank of India Ltd., rocketed upwards by an astonishing 19,200% to US$738 million for the three months ended March 31 from US$3.8 million a year earlier, the bank said in a statement.
State Bank’s risk reserves rose in the quarter after a US$1.4 billion capital infusion by the government. The profit increase was driven by a gain in loan income and a drop in funds set aside for defaults.
The government is further easing a credit squeeze by cutting the reserve requirements of Indian banks. Analysts believe the bank will be in a position to grow aggressively if the government sticks to its promise of further capital infusion this year.
The bank’s bad loans at State Bank fell to 4.4% of total credits in the quarter ended March 31, from 4.65 in the quarter ended December 31. State Bank reported a 99% plunge in profit a year earlier as provisions for bad loans and pensions increased.
“We declared war on non-performing loans and it seems like we are winning,” Chairman Pratip Chaudhuri said. “The fall in bad loans gives us the confidence that the quality of loans is well under control.”
Non-performing loans of state-run Indian banks climbed to 2.84% of total advances in the year ended March 31, from 2.35% in the prior year.
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