The Q2FY27 net profit came in at ₹23,040 crore, up 9.1 per cent sequentially and 14.3 per cent year-on-year (Y-o-Y). The net interest income (NII) grew by 4.6 per cent Q-o-Q and 14.3 per cent Y-o-Y. A sequential improvement in NIM was driven by lower cost of deposits, and better current account-savings account (Casa) balances.
Net profit was boosted by a pre-tax exceptional gain of ₹7,300 crore from a 6.3 per cent stake sale in SBI Funds. Adjusted for this, the profit after tax (PAT) of ₹17,000 crore was below estimates due to mark-to-market (MTM) treasury losses of ₹1,280 crore (versus ₹4,300 crore gain in Q1). SBI also saw increased operating expenditure (up 16 per cent Q-o-Q and 10 per cent Y-o-Y). Two stake sales — in NSE (₹2,400 crore) and ARCIL (₹80 crore) — were credited to reserves, not in the profit and loss statement.
Reported operating profit was ₹26,900 crore in Q2, down 19.7 per cent Q-o-Q and 1.4 per cent Y-o-Y. The core pre-provision operating profit (PPOP) was ₹24,700 crore, down 8.8 per cent sequentially, but up 20.2 per cent Y-o-Y. Deposits grew 12.3 per cent Y-o-Y to ₹63 trillion, with term deposits up by 14.3 per cent Y-o-Y. SBI has mobilised $10.9 billion through FCNR(B) deposits, and says the funds have been deployed to replace higher-cost wholesale deposits.
NIM improved 7 basis points (bps) on a sequential basis. Loan growth — excluding loans against FCNR(B) — was at 1.6 per cent Q-o-Q and 16.2 per cent Y-o-Y, which undershot expectations. The bank maintained FY27 credit or loan growth guidance of 14-15 per cent. Corporate loan growth was low at 1.3 per cent Q-o-Q, even though it was up 16 per cent Y-o-Y. Growth was led by agriculture (up 3.4 per cent Q-o-Q and 23 per cent Y-o-Y), SME (up 2.4 per cent Q-o-Q and 22 per cent Y-o-Y) and overseas loans (up 8 per cent Q-o-Q and 23 per cent Y-o-Y). Retail loan growth (up 3 per cent Q-o-Q and 15 per cent Y-o-Y) was led by gold loans (up 10 per cent Q-o-Q and 89 per cent Y-o-Y), while home loans, Xpress credit (unsecured personal loans) and auto loans were slow.
SBI maintained domestic NIM guidance of at least 3 per cent, depending on lower deposit costs and an expected benefit of the 25 bps external benchmark lending rate (EBLR) reset and a 15 bps marginal cost of funds-based lending rate (MCLR) increase. The domestic NIM improved Q-o-Q by 11 bps to 3.11 per cent while global NIM improved 8 bps Q-o-Q to 2.94 per cent. SBI enjoyed improved yield and lower cost of deposits — this decline was driven by FCNR(B).
Gross advances grew by 3.2 per cent Q-o-Q and by 17.8 per cent Y-o-Y running above FY27 guidance of 14-15 per cent. Asset quality saw gross annualised slippage ratio declining 17 bps Q-o-Q to 0.4 per cent and the gross and net non performing assets (GNPA/NNPA) reduced by 8 bps and 2 bps Q-o-Q respectively to 1.4 per cent and 0.4 per cent.
Net slippages of ₹2,140 crore is the lowest in many quarters. The provision coverage ratio (PCR) stood at 74.4 per cent (up 22 bps Q-o-Q). SBI management attributes this to disciplined underwriting, tight credit monitoring and improved recovery. Due to a drought in three states, SBI assesses a potential portfolio of ₹10,000 crore relating to crop loans.
The post-tax net one-time impact of expected credit loss (ECL) transition was ₹19,500 crore, or about 3 per cent of net worth. SBI said a 1 per cent return on assets (RoA) guidance already factors in incremental annual run-rate of ECL impact, barring serious deterioration in asset quality.
SBI has excess SLR of ₹3.5-3.7 trillion, which is about 7 per cent of net advances. This minimises the need to compete for deposits. The share of EBLR loans is 32 per cent, MCLR 27 per cent, T-Bill at 17 per cent and fixed-rate at 21 per cent.
SBI expects corporate credit growth to be healthy, with visibility for 16 per cent Y-o-Y growth over the second half of FY27, while letting go of low-yielding deals and refinancing opportunities. Management reiterated FY27 credit growth guidance of 14-15 per cent, with confidence, citing a corporate loan pipeline of ₹7.8 trillion and expected traction across gold loans, home loans and auto loans. Inexpensive valuations for the parent plus value of subsidiaries and associates make the stock look more attractive.
The writer is a New Delhi-based independent journalist
 "State Bank of India, SBI")