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State Bank of India's (SBI) profits more than doubled from a year ago in the October-December period, first such rise in five quarters for the nation's top lender by assets, helped by lower provisions for bad loans.
Standalone net profit, not including contributions from subsidiaries or associates, more than doubled to Rs 26.1 billion ($390 million) for the third quarter, versus Rs 11.15 billion a year ago. That was above an average estimate of Rs 24.64 billion from 23 analysts polled by Thomson Reuters.
The last time the bank posted a year-on-year rise in its quarterly profit was in the three months ended September 2015.
SBI, which accounts for more than a fifth of India's banking assets, saw its gross bad loans as a percentage of total loans rising slightly to 7.23% at the end of December, from 7.14% at end-September.
But provisions for bad loans fell to Rs 72.44 billion from Rs 76.7 billion in the September quarter and Rs 76.45 billion a year earlier.
Bad loans in India's banking sector were at a record high of $133 billion as of end-September. While SBI has fared better than its state-run peers in managing its sour assets, investors remain wary of the bank's heavy exposure to stressed industries such as steel and power.
Indian banks, including SBI, have seen a surge in low-cost deposits after a shock cancellation in November of 86% of the country's currency. This has helped lower banks' funding costs, although a scramble to replace scrapped banknotes has hit their other activities, such as lending.
SBI, which is merging its five subsidiary banks with itself and also taking over a small state-run lender for women, could tap the capital markets after the deal is closed to raise as much as $1.5 billion, Chairman Arundhati Bhattacharya told Reuters last month.
Shares in SBI were trading up 1.5% by 0751 GMT in a Mumbai market that was up 0.2%.
Bank of Baroda, the second-biggest state-run lender, reports third-quarter results later on Friday.
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