State Bank of India eyes 12-13% growth in international loan book

State Bank of India – the country's largest lender – is expecting to grow its international loan book at 12-13 per cent year-on-year (Y-o-Y) basis on increase in demand from Indian corporates and finance firms while protecting interest margins.

C S Setty, Managing Director, International Banking, Global Markets & Technology at SBI, told Business Standard overseas borrowing by Indian corporate and high-rated non-banking financial companies (NBFCs) is likely to grow as hedging costs are low and there is a softening bias of global interest rates.

The companies in the oil and gas sector would borrow more in the overseas market, Setty said. “Protecting the margin and maintaining asset quality is a prime consideration while booking business.”

The estimated loan pipeline in the international book in the near term is $1.5-2 billion, he said. The country’s largest lender’s international loan book expanded by 13.9 per cent Y-o-Y to Rs 5.53 trillion at the end of December 2023.

The lending book has three components – trade finance, External Commercial Borrowings (ECB) by Indian entities – corporates and finance companies – and local business in foreign offices, with each one of them having one-third share in the international banking loan book. The bank is also enhancing its presence in supply chain financing on platforms.

As for the outlook on interest margins in global books, Setty said there could be some pressure. The bank will work to reduce the cost of liabilities and improve yield on advances. The margins will correct with a small lag.

Its Net Interest Margins (NIMs) in overseas operations rose to 2.21 per cent in the third quarter ended December 2023, from 1.67 per cent a year ago. Sequentially, NIMs were up marginally from 2.19 per cent. NIMs for the whole bank were at 3.28 per cent in Q3FY24, almost flat compared to 3.29 per cent a year ago. Sequentially, they moderated by three basis points from 3.31 per cent in Q2FY24.

On raising funds, Setty said the bank has already raised $600 million in January. There is no fund raise planned in the immediate future. Besides bond markets, SBI will look at cost-effective fundraise via syndicated and bilateral loan arrangements. Overall, annual bank fund mobilisation is between $4-6 billion depending on demand for credit and market opportunities.

In early January, SBI raised $600 million by issuing a five-year paper from a clutch of investors across the globe as part of its $10 billion medium-term note programme. Also in December 2023, it had placed $250 million senior unsecured green floating rate notes maturing on December 29, 2028.