News · BFSI
State Bank of India's domestic net interest margin rose to 3.11% in the September quarter, aided by deployment of FCNR(B) deposits, but faster loan growth than deposit growth keeps funding costs in focus.
✦ AI SUMMARY 30-second read
- Domestic NIM rose 11 basis points sequentially to 3.11%; overall NIM expanded eight basis points to 2.94%
- Net profit grew 14.3% year on year to Rs 23,040 crore, partly aided by a Rs 7,300 crore gain from SBI Mutual Fund share divestment
- Gold loans surged 89.3% year on year; FY27 credit growth guidance held at 14-15%
Why it matters: SBI's ability to hold domestic NIM at or above 3% in FY27 will test whether FCNR(B)-driven cost savings can outlast faster loan growth.
This summary was generated by AI. Editors may review and update it.
State Bank of India posted a domestic net interest margin of 3.11% in the September quarter, an improvement of 11 basis points over the previous quarter. Its overall NIM expanded eight basis points sequentially to 2.94%. The bank has reiterated guidance to keep domestic NIM at 3% or above through FY27.
The margin improvement was driven largely by deploying surplus FCNR(B) deposits to replace high-cost liabilities. The bank mobilised 10.9 billion US dollars in FCNR(B) deposits and raised a further 8.83 billion US dollars by leveraging those inflows, using the funds primarily to substitute expensive wholesale deposits.
Loan and deposit growth
SBI's advances grew 18.2% year on year and 3.3% sequentially in the September quarter. Deposit growth was slower, rising 12.3% year on year and 4.5% sequentially. The gap between the two rates makes deposit mobilisation and funding costs critical to sustaining margins going forward.
Despite the mismatch in growth rates, the bank's domestic credit deposit ratio declined to 73%, which provides headroom for further loan expansion. The global credit deposit ratio also eased to 82.1% from 83.1% in the previous quarter, aided by FCNR(B) inflows.
Credit growth and asset quality
SBI has maintained its FY27 credit growth guidance at 14-15%, supported by healthy first-half performance and expectations of stronger disbursements in the second half. Retail advances grew 14.5% year on year, agriculture advances expanded 22.6%, and SME advances rose 22%. Corporate advances increased 16.1%. Within retail, gold loans were a standout, rising 89.3% year on year.
Asset quality improved during the quarter. Fresh slippages fell to Rs 5,230 crore from Rs 7,050 crore in the June quarter. Gross and net non-performing asset ratios improved sequentially by eight basis points and two basis points to 1.39% and 0.36%, respectively. The provision coverage ratio stood at 74.4% and credit costs at 0.22%.
Income and expenses
Net interest income reached Rs 49,140 crore, up 14.3% year on year and 4.6% sequentially. Other income, excluding the NSE divestment, fell 23.2% year on year to Rs 11,780 crore, partly because of treasury losses of Rs 1,280 crore against gains of Rs 4,320 crore in the prior quarter. Operating expenses rose 9.6% year on year to Rs 33,980 crore, partly reflecting front-loaded spending of around Rs 850 crore on IT services, vendor payments and MAP-related payments.
Reported pre-provision operating profit declined 1.4% year on year to Rs 26,940 crore, although core pre-provision operating profit grew 16%. Net profit rose 14.3% year on year to Rs 23,040 crore, supported by healthy net interest income and a one-off gain of Rs 7,300 crore from the divestment of SBI Mutual Fund shares. The CASA ratio declined 92 basis points sequentially to 38.3%, keeping the cost of funding under watch as the bank pursues its credit growth target.
What happens next
Around 32% of SBI's loan portfolio is linked to the external benchmark lending rate, 27% to the marginal cost of funds-based lending rate, 17% to Treasury bill rates and 21% carries fixed rates. Management's ability to sustain domestic NIM above 3% will hinge on whether the gains from replacing costly wholesale deposits hold up alongside the bank's targeted credit expansion.
Elets will update this story as further developments emerge.
