Why SBI is comfortably placed despite slow growth in deposits

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₹3.7 trillion with an available for sale (AFS) portfolio of ₹2.8 trillion, which can be sold to fund the growth in advances if needed. Therefore, the bank does not feel the need to raise deposits through aggressive pricing. Even though the net interest margin (NIM) in percentage terms came down by 12 basis points year-on-year to 3.35%, the lower growth in deposits vis-a-vis advances meant that absolute net interest income rose by 5.7% to ₹41,135 crore.

Even though other income fell by 7.5%, the quality of other income improved as fees increased by 4.5% and the share of volatile treasury income fell. As operating expenses remained flat, core (excluding treasury gains) pre-provisioning operating profit (PPOP) showed a strong growth of 11.8%. A 70% jump in NPA provisions moderated the core PBT growth to 8.1% to ₹18,758 crore.

The credit cost for the quarter stood at 0.48%, much higher than 0.32% year-on-year and 0.29% sequentially. However, this is still not alarming and in line with the trend seen so far in the banking sector. In addition, the bank carries additional non-NPA provisions of ₹31,000 crore.

This extra provision, considering its loan book of ₹37 trillion, should help in absorbing any future shocks in NPAs. For FY25, the credit cost guidance remains at almost Q1 level. More importantly, there is a hanging sword of expected credit loss (ECL) based provisioning norm coming into force with high probability in FY26.

But the bank’s management is confident of smooth transition to the new norm. The bank aims to maintain NIM in the range of 3.2-3.4% going forward with advance growth target of 15%. Even though deposit rates have increased year-on-year, the bank is hopeful of mitigating the adverse impact through two