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SBI loan growth slowed to 8% in April-June

State Bank of India's loan growth slowed in April-June, reflecting the domestic economic slowdown, according to analysts.

India's largest commercial bank said in a statement that total advances increased last quarter by 7.84 per cent from a year earlier. That was half the 16 per cent jump over the preceding year.

Interest earned on loans last quarter increased just 9.72 per cent -- to Rs 28.54 billion from Rs 26.01 billion a year earlier.

By contrast other income, which includes gains from treasury operations, surged 23.1 per cent -- to Rs 9.90 billion from Rs 8.04 billion.

That enabled the bank to post an increase in net profit far greater than possible through lending alone, given the sluggish state of the economy and downtrend in interest rates.

On Wednesday the State Bank of India posted a net profit of Rs 5.82 billion for April-June, up almost 26 per cent from a year earlier. Total income rose nearly 21 per cent to Rs 81.32 billion.

The state-run bank -- and seven regional banks in which it owns more than 50 per cent -- account for 25-30 per cent of all deposits held and loans issued by Indian banks.

ECONOMIC SLOWDOWN

Analysts said lending growth eased due to the slowdown of the Indian economy. GDP growth slipped to an estimated 5.2 per cent in the past year to March, from 6.4 and 6.6 per cent in the previous two years.

"There is no way that the bank can escape the slowdown. But one can expect a turnaround in a few months," an analyst at a foreign brokerage firm said.

The slowdown forced the bank to increase provisions toward non-performing loans -- to Rs 4.50 billion the past quarter from Rs 3.5 billion a year earlier.

Analysts had expected gains from SBI's investments in government bonds to boost its bottomline. SBI is the largest investor in Indian government bonds, prices of which have risen on expectations domestic interest rates would decline.

The yield on the benchmark 10-year bond dropped to 9.5 per cent by end June, from 10.4 per cent at the start of April. For bonds, there is an inverse relationship between price and yield.

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