State Bank of India (SBI) beat analysts’ expectations on Tuesday with the first quarter net profit rising 10.2 percent year-on-year to Rs 3,692 crore. Other income supported profitability but slow growth in net interest income & operating profit and higher provisions restricted growth.

Net interest income missed estimates, up 3.6 percent to Rs 13,732 crore due to slow growth in advances and fall in net interest margin. Net interest income is the difference between interest earned and interest expended.

Net profit was estimated at Rs 3,500 crore (up 4.5 percent) and net interest income at Rs 14,599 crore (up 10.2 percent) for the quarter, according to average of estimates of analysts polled by CNBC-TV18.

SBI said gross advances in Q1 increased 6.6 percent year-on-year to Rs 13.14 lakh crore with large corporate advances growth at 13.13 percent and retail advances 15.52 percent. Deposits of the bank rose 13.72 percent to Rs 16.1 lakh crore with saving accounts growth at 10.14 percent and current accounts at 7.95 percent during the same period, it added.

Domestic net interest margin declined from 3.54 percent in Q1FY15 to 3.29 percent in Q1FY16 due to reduction in base rate by 30 basis points and also because of subdued growth of 5.38 percent in advances, it added.

Non-interest income (other income) grew by 19.7 percent year-on-year to Rs 5,088 crore on higher fee income. The bank said fee income jumped 12.86 percent to Rs 3,202 crore in Q1FY16.

Operating profit increased by 4.7 percent to Rs 9,202 crore, impacted by higher operating expenses that jumped 10.3 percent.

Provisions and contingencies in June quarter climbed 14.4 percent (down 39.3 percent sequentially) to Rs 4,000 crore while provisions for non-performing assets dropped 14 percent (down 27.5 percent quarter-on-quarter) to Rs 3,358.6 crore compared to year-ago period.

Provision coverage ratio at the end of June quarter was 69.49 percent, said SBI in its filing.

Asset quality improved on year-on-year basis. Gross non-performing assets (NPA) in Q1 declined 61 basis points (up 4 bps quarter-on-quarter) to 4.29 percent and net NPA dropped 42 bps (up 12 bps Q-o-Q) to 2.24 percent compared to same quarter last year.

In absolute term, gross NPA was at Rs 56,420.8 crore in June quarter, down 6.6 percent compared to year-ago period and 0.5 percent compared to March quarter. Net NPA slipped 10 percent year-on-year (up 3.9 percent sequentially) to Rs 28,669.1 crore.

Slippages for the quarter increased to Rs 7,318 crore against Rs 4,769 crore on sequential basis, which was in-line with estimates. Restructuring was higher than estimates at Rs 3,936 crore against Rs 3,000 crore in March quarter. Analysts had expected restructuring of assets worth Rs 3,000 crore for the quarter.

Recoveries were at Rs 1,209 crore in Q1FY16 against Rs 4,485 crore in Q4FY15 while upgrades for the quarter were at Rs 1,494 crore.

Capital adequacy ratio in Q1 maintained at 12 percent on sequential basis but declined compared to 12.33 percent on year-on-year basis.