State Bank of India: Healthy loan growth, fall in provisions spruce up SBI Q3

Mumbai: State Bank of India (SBI), the country’s largest lender by assets, reported an 84% on-year rise in net profit to Rs 16,891 crore in the December quarter, paced by the absence of provisions for pension and wage increases and healthy loan growth that helped offset the impact of industry-wide margin pressures.

Unlike a year ago, SBI did not have to make a ₹7,100-crore provision for employee pension and wages, boosting profit growth at the country’s most-valued government-owned company.

Quarterly loan growth at SBI, which owns a fifth of all outstanding bank credit in India, was 13%, and exceeded the system-level credit offtake by a good 200 basis points. One basis point is a hundredth of a percentage point.

However, stiff deposit rates gnawed at the margins, accounting for the circumspect 4% expansion in the net interest income (NII), or the difference between interest earned on loans and that paid for deposits. “We have seen a shift from savings account deposits to fixed deposits,” said Chairman CS Setty. “Although the yield on advances have mostly held up, it is the cost of deposits that have increased. Most depositors have locked in at the longer-term deposits.”

Unsecured Loan Growth to Slow
Net interest margin (NIM), or the difference between the yield earned on loans and interest rate paid for deposits, dropped to 3.01% in December 2024 from 3.22% a year ago, and was also lower than the 3.14% reported in the quarter ended September.

Setty, however, said the compression in margins may either reverse or stay where it is, with limited likely increase in the incremental cost of funds.

“But we feel that the cost of deposits have peaked and hopefully the margins will remain here,” Setty said.

The loan book at SBI, the only Indian lender to feature in Reliance Industries‘ latest $3-billion dual currency debt syndicate, was driven by a 15% rise in corporate loans even as non-home retail loans expanded a slower 12% year on year. Gross advances crossed ₹40 lakh crore to ₹40.67 lakh crore, while deposits increased 10% to ₹52.29 lakh crore.

Retail Loans
The bank has slowed its flagship unsecured product, Xpress Credit loan, noting the heightened risk in this segment. These loans grew just 3% year on year. Setty said the bank has recalibrated the risk assessment in its unsecured loans and will now grow the book “in double digits but not at the 30% compounded rate seen earlier.”

SBI’s non-interest income fell 4% year on year because both trading as well forex earnings fell sharply. The bank accounted for mark to market loss of ₹1,500 crore during the quarter, a reversal from the ₹1,900 crore of gains booked a year ago.