State Bank of India Q3 net profit plunges as bad loans rise

State Bank of India (SBI), the nation's top lender by assets, said quarterly net profit fell nearly two-thirds, below estimates, as it soaked up more bad loans and provisions in line with a Reserve Bank of India (RBI) drive to tidy up India's banking industry.

The lender said on Thursday net profit for its fiscal third quarter ended December slid 62 percent to 11.15 billion rupees ($164 million) from 29.1 billion rupees a year earlier. Analysts on average had expected a net profit of 33.08 billion rupees.

SBI's provisions for bad loans almost doubled from a quarter earlier to 76.45 billion rupees. Still, gross bad loans expressed as a percentage of total loans only rose to 5.1 percent from 4.15 percent over the same period.

Shares in SBI, which accounts for almost a quarter of India's banking business, at first rose more than 5 percent after the results were published as investors rated the bank as outperforming peers. But they later reversed, falling as much as 2.8 percent, as gloom settled over the industry's prospects.

The RBI, the banking sector regulator, has asked lenders to treat some accounts with questionmarks hanging over them as official 'bad loans' and make adequate provisions. The central bank is attempting to clean up India's bank balance sheets by March 2017.

More than two dozen lenders majority-owned by the government dominate India's banking sector with two-thirds of the assets. These lenders together also account for about 85 percent of the sector's troubled assets.

Earlier on Thursday, state-run Bank of India reported a loss for the December quarter as bad loans surged, whereas quarterly profit at another state-owned lender, Union Bank of India fell 74 percent.