In the first quarter of the fiscal, the bank had reported a net profit of Rs 3,752 crore, a massive 137 per cent rise over the year-ago period, driven by higher income and lower growth in operating expenses.

The profit in July-September 2012 was boosted by a steep 37 per cent drop in provisions for NPAs at Rs 1,837 crore from Rs 2,921 crore a year ago, as the bank had made higher provisions in the previous quarter.

Total income rose 12 per cent to Rs 32,953.47 crore from Rs 29,394.32 crore a year ago.

"The (higher) net profit can be attributed to lower provisioning and also better management of the credit portfolio," SBI chairman Pratip Chaudhuri told reporters at the bank's Nariman Point headquarters.

However, the bank witnessed subdued growth in its core interest income due to a slower credit growth, he said.

SBI's net interest income (NII), which is the difference between interest earned and given away, grew only 4.96 per cent to Rs 10,974 crore in the reporting quarter compared to Rs 10,482 crore in the same period last fiscal.

The key profit criterion, the net interest margin (NIM), which is the difference between the cost a bank incurs on deposits and the yield it receives by lending it in terms of interest, stood at 3.77 per cent for domestic operations and 3.45 per cent at the entity level.

In the same period last fiscal, NIM stood at 4.09 per cent in the domestic business and 3.81 percent for the group.

"We are confident of maintaining NIM above 3.75 per cent in the current fiscal," Chaudhuri said, adding that lowering of deposit rate will support the improvement in margin.

But concerns on asset quality continued with rise in both gross and net NPA numbers. While gross NPA jumped to 5.15 per cent of total advances from 4.19 per cent a year ago, net NPA rose to 2.44 per cent from 2.04 per cent.

In absolute terms, gross non-performing assets rose to Rs 49,202.46 crore, while net NPA rose to Rs 22,614 crore. The net NPA addition stood at Rs 13,200 crore against Rs 11,400 crore a year ago.

However, the bank said provisions for NPA came down by 37 per cent, as the bank has made higher provisions in the previous quarter.

After plunging over 4 per cent intra-day, SBI shares closed 3.89 per cent down at Rs 2,156.35 on the BSE, whose main index Sensex was also down by 0.86 percent or 163 points.

Analysts said the market reacted badly as the asset quality worries returned to haunt SBI.

Kotak Securities banking analyst Saday Sinha said asset quality continued to disappoint for SBI. "Although net (profit) grew marginally higher than our expectations on back of lower NPA provisioning, the negative surprise came on the addition to stressed assets at Rs 13,200 crore as against Rs 11,400 crore seen during the previous quarter," he said.

Higher recovery up-gradation is definitely positive but sustaining this kind of run-rate in future will be difficult, which is a key risk, he said.

Emkay Global Financial Services said the SBI numbers have disappointed yet again. "The numbers are significantly below our expectations. Earnings dragged by 0.16 per cent contraction in NIM and lower NII. Asset quality worsens further with gross NPA jumping to 4.3 per cent," it said.

SBI chairman said the bank is shying away from taking bulk deposits, which stands at 1.3 per cent of overall base at the end of September.

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