State Bank of India Q3 net profit drops 35%

State Bank of India (SBI), the country’s largest lender, reported an unexpectedly steep 35 percent drop in net profit for the October-December quarter, weighed down by higher pension costs and wage revisions.

SBI reported in a stock exchange filing that net profit fell to 91.64 billion rupees ($1.1 billion) in its fiscal third quarter from 142.05 billion rupees in the same period a year earlier.

Analysts had estimated a profit of 129.87 billion rupees for the quarter, according to LSEG data.

The bank said that a 71-billion-rupee provision for wage revisions and pension costs hit profit.

SBI’s net interest income — the difference between interest earned and paid — rose 4.6 percent to 398.16 billion rupees. Net interest margins dipped by 35 basis points on-year and nine bps quarter-on-quarter to 3.34 percent due to deposit repricing.

Most Indian banks have reported a drop in net interest margins for the fiscal third quarter as deposits were repriced higher amid tight banking system liquidity conditions.

SBI has seen the peak of deposit rates, and deposit repricing is mostly done, Chairman Dinesh Kumar Khara told reporters at a post-earnings press briefing in Mumbai.

He pegged credit growth between 14-16 percent for this financial year.

SBI’s loans grew 14.38 percent yearly, while deposits rose 13.02 percent.

The gross non-performing asset (NPA) ratio was at 2.42 percent at December-end, which Khara said was the lowest in 10 years, from 2.55 percent at the end of the prior three months.

SBI is open to raising equity capital in the future if the need arises, Khara said.

The lender is also open to acquire merchant accounts of Paytm after the RBI halted fresh business in Paytm Payments Bank, SBI said.

“Paytm’s settlement account is there with us,” Khara said. “So long as we don’t get any instruction from RBI on that account, we are open.”