SBI Q3 net profit up 84.32% at Rs 16,891 cr, margins under pressure

Sequentially, the public sector lender's profit was down by 7.86 per cent from Rs 18,331 crore in the quarter-ended September (Q2FY25)

The net profit of State Bank of India (SBI), country’s largest lender, jumped  84.32 per cent year-on-year (Y-o-Y) to Rs 16,891 crore for the October-December quarter (Q3FY25).

  This increase was mainly due to a one-time expense of Rs 7,100 crore incurred in the year-ago quarter. The expense was due to a one-time increase in pension liabilities at a uniform rate of 50 per cent and dearness relief neutralisation.

  Sequentially, the public-sector lender’s profit was down 7.86 per cent from Rs 18,331 crore in the quarter ended September (Q2FY25). 

  Net interest income (NII) grew 4.09 per cent Y-o-Y to Rs 41,446 crore in Q3FY25, compared to Rs 39,816 crore in the year-ago quarter. Sequentially, NII remained flat at Rs 41,620 crore.

 

  Margins came under pressure, with the net interest margin (NIM) declining to 3.01 per cent in Q3FY25, against 3.22 per cent in the same period a year ago. Sequentially, NIM was down from 3.15 per cent in Q2FY25.

  The yield on advances in domestic operations was almost flat at 8.88 per cent in Q3, while the cost of deposits increased to 5.07 per cent in Q3FY25 from 4.75 per cent in Q3FY24 and 5.03 per cent in Q2FY25. 

  With the Reserve Bank of India likely to cut interest rates, and with 28 per cent of SBI’s loans linked to external benchmarks, margins could be under pressure as deposit rate repricing comes with a lag.

  “Some of the rate cuts will also reflect in deposit costs. We are hopeful that we will maintain the NIM at 3 per cent,” SBI Chairman C S Setty said during the post-earning media interaction. “Cost of deposits has peaked and we are holding on to yield on advances,” he said.

  The bank’s non-interest income declined to 3.65 per cent Y-o-Y to Rs 11,041 crore, due to a 74.28 per cent fall in trading profit at Rs 1,194 crore and a 95.69 per cent plunge in forex income at Rs 48 crore.

  SBI’s asset quality improved, with gross NPA ratio falling to 2.07 per cent from 2.42 per cent in the year-ago period and net NPA ratio declining to 0.53 per cent from 0.64 per cent.

  Credit cost for the quarter was 0.24 per cent, up 3 bps Y-o-Y. The provision coverage ratio, including technical write-offs, stood at 91.74 per cent in December, compared to 91.49 per cent a year ago.

  The bank’s loan loss provisions rose to Rs 2,305 crore in Q3 from Rs 1,756 crore in Q3FY24. However, they declined from Rs 3,631 crore in Q2FY25.

  SBI’s advances grew 13.49 per cent Y-o-Y to Rs 40.67 trillion in Q3FY25, with retail advances rising by 11.65 per cent to Rs 14.47 trillion.

  “Credit growth continues to be robust across all segments,” Setty said, adding that the bank expected 14-16 per cent loan growth in FY24 and around 10 per cent growth in deposits. “Our credit-deposit ratio is 69 per cent, implying there is sufficient headroom to address future growth of the economy,” he said.

  SBI’s loan pipeline of Rs 4.83 trillion remains strong. The bank expects double-digit growth in unsecured personal loans, which will also aid margins, Setty said, adding that while the banking sector is seeing stress in the microfinance portfolio, SBI’s exposure to the sector is small, at around Rs 10,000 crore.

  Total deposits increased 9.81 per cent Y-o-Y to Rs 52.29 trillion. The share of low-cost deposits — current account and savings account (CASA) — in the domestic book declined to 39.2 per cent at the end of December 2024 from 41.18 per cent a year ago. Sequentially, the share fell from 40.03 per cent in September 2024.

  “Any higher share of CASA deposits seems difficult in the backdrop of a shift in savings behaviour, which is irreversible in my view. The trend of looking for good returns on savings is here to stay. Also, the government’s management of its own cash flows is impacting current accounts,” Setty said.

  The Capital Adequacy Ratio (CAR) at the end of the Q3FY25 stood at 13.03 per cent, with the Common Equity Tier I (CET I) Capital at 9.52 per cent as of December 2024. If profits from the first nine months are considered, the CAR would improve to 14.5 per cent.