State Bank of India beat expectations and posted its highest quarterly profit in nearly seven years on Friday, as the country's biggest lender by assets set aside lower provisions for bad loans and asset quality improved.

Its net profit was Rs 3955 crore ($556 million) for the third quarter ended December 31, versus a loss of Rs 2416 crore a year ago, and analysts' expectations for a profit of Rs 3208 crore, according to Refinitiv data.

This is the bank's biggest quarterly profit since it reported a bottom line of Rs 4050 crore rupees in the March quarter of 2012.

In the current quarter, SBI's provisions for bad loans dropped 21.3 percent to Rs 13971 crore from a year earlier, the bank said in a stock exchange filing.

A write-back on provisions made for mark-to-market losses helped total provisions drop 68.2 percent. Net interest income grew 21.4 percent to Rs 22691 crore, driven by healthy growth in loans.

SBI, which accounts for more than a fifth of India's banking assets, saw its gross bad loans as a percentage of total loans ease to 8.71 percent at end-December, from 9.95 percent in the previous quarter and 10.35 percent in the year-ago period.

In absolute terms, its gross bad loans eased from the previous quarter to Rs 1.88 lakh crore rupees, helped by a slowdown in slippages.

SBI shares, which rose 3.1 percent after the results, reversed course to trade 2.1 percent lower by 0841 GMT.

First Published:Feb 1, 2019 2:10 PM IST