The country’s largest bank, State Bank of India, joined ICICI Bank in recording a better-than-expected 10.19% rise in its net profit year on year (Rs 2,490 crore for the second quarter of 2009-10, against Rs 2,260 crore). Both banks benefited from a rise in treasury income, results released on Saturday showed. SBI chairman OP Bhatt said he was sure credit disbursal would recover in the second half of the financial year. “We target to achieve 22-25% credit growth in the current fiscal as disbursals worth Rs 50,000 crore are pending with the bank.”

The bank’s net interest margin, that measures profitability of its lending, is likely to rise as much as 15 basis points in the coming quarters, he said. For the quarter ended September 30, 2009, the net interest margin of the bank was 2.55% as against 3.16% during the corresponding period last year.

Anticipating a weaker result, shares of the bank fell 0.2 % to Rs 2,191.05 on Friday. The total income of the bank for the quarter ended September 30, 2009, went up around 19% to Rs 21,301 crore as against Rs 17,910 crore earned last year. As the largest bank in the country, the performance of SBI is also a general indication of how the economy will fare.

In August, Bhatt had said he was confident that SBI’s performance would improve once the high cost deposits the bank was saddled with were neutralised. He expected that to happen by the end of September. Commenting on the current interest rate scenario, Bhatt said, “There is no scope to reduce our prime lending rates any further after having already slashed it by 200 basis points during the last one year. Our lending rates cannot be reduced until the cost of resources came down.”

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