State Bank of India’s (SBI), the country’s largest lender, posted 30.5 per cent rise in net profit at Rs 3,100 crore for the second quarter ended September 2014 as compared to Rs 2,375 crore in the same period of the previous year, due to robust growth in income from interest, fees and control over costs.

“The net profit growth is due to both interest and non-interest income. We have also controlled our expenses,” said Arundhati Bhattacharya, chairman, SBI.

A fall of 4.4 per cent in staff expenses helped the bank to contain overall operating expenses growth at 2.2 per cent to Rs 9,423 crore, while operating profit went up by 33.4 per cent to Rs 8,422 crore.

Saday Sinha, banking analyst, Kotak Securities, said net profit was marginally higher than the market expectations on back of flat operational expenditure and lower tax payment, while robust non-interest income helped in strong net revenue figure.

Its stock closed at Rs 2,788, up 2.55 per cent than its previous close on the Bombay Stock Exchange.

The net interest income, that is the difference between interest earned and interest expended, rose by 8.35 per cent to Rs 13,274 crore, up from Rs 12,251 crore due to sluggish loan growth, which was around 9 per cent.

The net interest margins for domestic operations were flat at 3.49 per cent in Q2 of FY15 as against the same quarter of last year.

The other income, comprising revenues from fees, commissions and investments, grew by 32.41 per cent to Rs 4,570 crore in Q2 from Rs 3,287 crore a year ago. Fee revenues grew by 19 per cent to Rs 3,111 crore.

The deposits rose by 14.03 per cent to Rs 14,73,785 crore. The share of low-cost deposits declined to 42.79 per cent at the end of September from 43.58 per cent a year ago. The bank has indicated deposits would grow around 14 per cent for the year ending March 2015.

Bhattacharya said the interest rates on deposits are headed downwards. The bank incurred higher interest cost, as people have put money in term deposits at present rates, which stayed elevated.

Reflecting slowdown in the economy, credit grew by just 9.07 per cent to Rs 12,42,638 crore. Loans to corporate spiked by 17.23 per cent to Rs 2,33,012 crore a year. Besides drawing of sanctioned credit, refinancing loans helped to grow corporate loan book.

The chairman said the bank has not seen robust demand and credit growth is expected to be 11-12 per cent for FY15. There credit will not grow aggressively.

The 11-12 per cent growth is a climb-down from earlier guidance of about 15 per cent.

The asset quality has remained stable with gross non-performing assets declining to Rs 60,712 crore (4.89 per cent of gross advances) at end of September 2013 from Rs 64,206 crore (5.64 per cent) at end of September 2013, despite Rs 7,700 crore of fresh slippages during the quarter. The upgradation and recovery was close to Rs 2,500 crore. The provision coverage ratio was 63.18 per cent.

The bank restructured loans worth Rs 4,351 crore in the second quarter. The debt recast pipeline is pegged at Rs 3,000 crore for the third quarter.

Commenting on asset quality pressures, the chairman said there will not be any sharp improvement, as economic slowdown is deep.

About consolidation of associate banks, she said the bank is close to coming up with a road map. It would discuss plans with government before making them public.