SBI expects stronger results in second quarter

State Bank of India (SBI) expects a stronger second quarter after provisions for sour loans coupled with treasury losses led to a second straight drop in quarterly profit for the country’s top lender.SBI, which with its associates controls about a quarter of Indian bank loans and deposits, has been aggressively making provisions in recent quarters, as its Chairman Pratip Chaudhuri has vowed to clean up its balance sheet since he took over in April.SBI on Saturday posted a 46 per cent drop in net profit for its fiscal first quarter ended June. For the preceding quarter, profit had plunged 99 per cent, when its provisions soared. “We will not have the treasury losses that we incurred in this quarter. So profits will automatically go up,” Chaudhuri told reporters in New Delhi.The bank expects its September quarter net profit at about 25 billion rupees, Chaudhuri said, almost flat compared with the year-ago period. “We are under an obligation to reach a provision coverage ratio of 70 per cent. We are happy we have come very close to it. 68 per cent is our ratio now,” said Chaudhuri. High interest rate have dampened demand for credit in Asia’s third-largest economy, and Chaudhuri expects the bank’s credit book to grow 16-19 per cent and deposits by 20-21 per cent for the fiscal year ending March, 2012.India’s central bank raised its key lending rate by a surprise 50 basis points last month to fight inflation. It also cut credit growth forecast for banks to 18 per cent from 19 per cent projected earlier.Banks have seen a drop in net interest margins -a key gauge of profitability for banks -due to higher borrowing costs, but pressure on margins could ease in the coming quarters as banks pass on lending rate increases to customers.SBI reported net interest margins (NIM) -a key measure of efficiency -of 3.62 per cent for the period, and Chaudhuri said he is “tempted” to raise his previous outlook for NIM by 10 basis points to 3.6 per cent.He said he expects government’s contribution in the bank’s planned rights issue at about 50-90 billion rupees this fiscal year.Bad loans at Indian banks are expected to rise to about 2.6 per cent of their total assets in the year to March 2012 from 2.3 per cent a year ago, ratings agency Crisil has said. From / Gulf Today