State Bank of India sees loan growth revival

On Saturday, the state-run lender posted a 10.2 percent rise in September quarter net profit to 24.9 billion rupees ($530.2 million) on trading gains as core operations suffered on slipping loan demand and low lending rates.

A Reuters survey of analysts had forecast net profit at 24.6 billion rupees.

On Friday, closest rival ICICI Bank said quarterly net profit rose 2.6 percent, beating forecast.

Rising business confidence in Asia's third-largest economy is expected to bring back corporate, housing, auto and retail demand helping Indian banks boost sagging loan growth.

"Loan growth was slow until June. After that it has picked up significantly and if the rate of growth continues we should be able to meet our targets," Chairman O.P. Bhatt told reporters.

Advances grew 16.4 percent in July-September, lagging its 30 percent surge over the past few years but ahead of the 13 percent sector growth, said State Bank, which along with its associates controls almost a quarter of Indian bank loans and deposits.

But it expected to reach credit growth of 22 percent in the year to March 2010, Bhatt said.

Most Indian corporates have beat earnings estimates in the September quarter, trimming the risk of rising bad debt for Indian banks.

Bad debts for State Bank, which has 12,000 branches across India and abroad, have risen 2.99 percent in the fiscal second quarter compared with 2.79 percent in the June quarter.

It also said provisions for bad debts fell to 42.9 percent in July-September compared with last quarter's 45.2 percent.

Analysts said State Bank and ICICI Bank would be among the worst hit by the country's central bank move this week to raise the minimum provision ratio for bad debts to 70 percent from 10 percent by September 2010.