SBI reports first profit growth in six quarters

MUMBAI (Reuters) - State Bank of India, the nation's top lender by assets, reported its first profit increase in six quarters on Friday on higher interest income, and said that bad loans were largely stable.

SBI, which accounts for about quarter of loans and deposits in India, said standalone net profit rose 3.3 percent year-on-year to 33.49 billion rupees ($545.22 million) in its fiscal first quarter to June 30, in line with analysts' estimate of 33.35 billion rupees.

Interest earned for the quarter rose 15 percent from a year earlier to 364.87 billion rupees.

Net non-performing loans as a percentage of total assets were 2.66 percent in June quarter from 2.57 percent in the previous three months, but gross non-performing loans were 4.9 percent compared with 4.95 percent in March quarter, the bank said.

Slower credit growth and a rise in bad loans have dragged the bank's profits lower for every quarter since the three-months ended December 2012.

A surge in bad loans has been one of the biggest challenges for the lenders, and state-run banks have seen bad loans piling up faster than their private sector peers.

SBI, which is nearly 59 percent owned by the Indian government, this year pledged to increase scrutiny of bad loans by doing regular reviews and using technology.

Indian lenders are hoping to see loan growth led by a revival in economic growth and project approvals after a new government took power this year. The economy grew less than 5 percent in the past two fiscal years, slowing loan growth and increasing borrower defaults.

Shares in SBI, valued at nearly $30 billion, were down about 1 percent by 0741 GMT in a Mumbai market that fell 1.3 percent. The stock has risen more than a third this year, outperforming the broader Nifty.

($1 = 61.4250 rupees)

(Reporting by Devidutta Tripathy; Editing by Miral Fahmy)