Buy State Bank of India Ltd by Bajaj Broking Ltd
State Bank of India (SBI) reported a healthy set of numbers for Q1FY27, with net interest income (NII) and net profit increasing by 14.4% YoY and 10.2% YoY, respectively. Pre-provisioning operating profit (PPOP) grew 9.8% YoY and 21.0% QoQ. The bank’s asset quality improved further, with gross non-performing assets (GNPA) declining by 2 bps QoQ to 1.47% as of 30 June 2026. Advances grew at a robust pace of 19.9% YoY, while deposit growth was relatively moderate at 11.6% YoY. SBI continues to perform at par with leading private sector banks, thereby maintaining its position among the top BFSI names. The bank remains focused on strengthening and leveraging its liability franchise to optimise the balance sheet and support growth. Healthy business growth, coupled with a strong NIM of 3.0% and consistent improvement in asset quality, reinforces our confidence in SBI, as we retain Buy from a long-term perspective.
Asset quality continues to improve:
Gross NPA declined by 2 bps QoQ to 1.47% as of 30 June 2026, extending the improvement streak to four consecutive quarters and reaching the lowest NPA level in nearly two decades. The bank’s credit cost stood at 27 bps, supported by a healthy provision coverage ratio of 74.2%. Consequently, net NPA declined by 1 bp QoQ to 0.38%. The Advance Under Collection Account (AUCA), comprising accounts that are fully provided for, stood at 91.8% as of 30 June 2026.
Total business reached Rs110 trillion mark:
SBI continued to witness strong, broad-based advances growth, with advances rising 19.9% YoY and 2.3% QoQ to approximately Rs50 trillion as of end-June 2026. Growth was led by the Agri and SME segments, which expanded by 25.4% YoY and 22.3% YoY, respectively. Consequently, their share in the total domestic loan book increased by 59 bps and 52 bps, respectively. Corporate loans grew 18.1% YoY and maintained their share in the loan book, while personal loans grew at a relatively moderate pace of 15.1% YoY. Deposit growth also improved, rising 11.6% YoY to Rs60 trillion, primarily driven by a 14.4% YoY increase in retail term deposits, ahead of 9.3% YoY growth in CASA deposits. However, the CASA ratio remained healthy at around 38%, among the strongest in the industry.
- The non-interest income declined for second consecutive quarter QoQ and was down 8% YoY. The decline was driven by forex and derivatives income declining 69.5% YoY and profit/loss from revaluation of investments lower by 31.7% YoY. The core fee income, however, increased 20.8% YoY backed mainly by loan processing fee up 59.5% and commission on government business up 50.3% YoY.
- Operating efficiency improved considerably with cost-to-income ratio declining to 46.7% in Q1FY27 as compared to 47.7% Q1 last year and 49.4% in Q1FY25.
- SBI’s reported strong return ratios with RoA at 1.1% and RoE at 17.87% as of 30 June 2026. This was supported by healthy NIMs of 3.0% for domestic business and 2.86% for overall business of the bank.
- SBI’s retail credit portfolio stood at 14.5% of total domestic advances. Of this, home loans which contribute 54.1% grew by 12.8% YoY. SBI’s gold loan portfolio nearly doubled (up 97.5% YoY) to Rs1.25 lakh crore as of June 2026. ~73% of the bank’s asset book is rated AA and above, and nearly 41% of the same is the share to PSUs and government departments.
- In absolute terms, gross NPAs continued to improve declining by 4.8% YoY, while on QoQ it was marginally up by 1.1%. The gross NPA ratio, however, declined by 36bps YoY and 2bps QoQ.
Above views are of the author and not of the website kindly read disclaimer
