State Bank of India topped market expectations for the first quarter despite a 32 per cent plunge in net profit, sending its shares more than 7 per cent higher as investors cheered its improved operating performance. Net profit at the nation’s biggest bank fell to Rs 2,521crore from Rs 3,692 crore a year earlier. The average of estimates in a Bloomberg poll of analysts was Rs 2,503 crore. Bad loans from corporate houses nearly doubled, dragging down the profit even as treasury and retail operations posted a stellar performance. Pretax profit from retail rose 46 per cent from a year earlier to Rs 4,828.48 crore, while that in treasury more than doubled to Rs 4,087 crore.The analyst community was positively surprised by SBI’s earnings and many said that the bank was out of the woods. “While one cannot generalise that the overall PSU banks will start seeing revival, it is fair to assume with the current set of results that SBI’s management has been able to sail through tough times and asset quality could see improvement from here on,” said Siddharth Purohit of Angel Broking.On Friday, shares of the bank closed 7.2 per cent higher at Rs 243.20 on the Bombay Stock Exchange, helping lift the BSE Bankex 2 per cent. The benchmark Sensex ended 1.1 per cent up. Management commentary also suggested that the worst days were now behind the state-run bank. “The kind of spike (in NPA) that you saw last quarter, I don’t think you are going to see that again,” SBI chairman Arundhati Bhattacharya said. “The improvement will happen gradually. Our slippages are still a little elevated over a period of time. This will normalise and I would not put itbeyond the next two-three quarters.” State-run banks are still reeling under tremendous stress of bad loans as many of the large projects that they funded during the boom period are becoming white elephants.While some of the projects are stuck due to bureaucratic hassles, like permissions, other have seen developers siphoning off funds or inflated project costs that have made them nonviable. “The maximum amount of stress remains in the sectors of iron & steel, power; whatever stress was there, those continue,” Bhattacharya said. “Whatever we had given out in terms of watch list, all those accounts still display stress.”