State Bank (Q,N,C,F)* of India (SBI), the largest public sector lender, announced Thursday a rise of 4.08% y-o-y in net profit to Rs 33.96 billion for the quarter ended Dec. 31, 2012. Analysts on an average had expected net profit to come at Rs 35.13 billion.

During the quarter, total income grew 14.12% to Rs 339.92 billion over same period last year. NII for the quarter came in at Rs 111.54 billion.

Meanwhile, net NPA was at 2.59% as on the quarter ended Dec. 31, 2012, as compared to 2.22% in the year ago period. While gross NPA is at 5.30% as on Dec. 31, 2012 as compared to 4.61% in the same period last year.

Vaibhav Agrawal, VP research, Angel Banking said, ''State Bank of India reported subdued operating performance for 3QFY2013, as its net interest income (NII) and operating profit declined by 2.7% and 4.2% yoy, respectively. The bank has been aggressive in cutting its lending rates, so the decline in NII, was in-line with our expectations. The bank witnessed continued pressures on the asset quality front, as elevated slippages and sequentially lower recoveries/upgrades resulted in 8.6% sequential increase in gross NPA levels, with net slippages being about Rs 8 billion higher than our estimates. As a result, in spite of slightly higher provisioning expenses than estimated by us, provisioning coverage ratio declined by about 130bp sequentially. We await the guidance of the management on the asset quality outlook, in the backdrop of an improvement seen in the overall asset quality of the PSU pack. At the current market price, the stock is trading at 1.5x FY2014E ABV (adjusting for value of subsidiaries 1.3x FY2014E ABV) vis-à-vis its historic range of 1.3-2.3x and median of 1.6x. We maintain our Accumulate view on the stock."

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