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Strong earnings quality maintained

SBI saw a good quarter due to better core revenue and asset quality. Adjusted for IT refund, reported NIM was up ~10bps QoQ to 2.85% while core fee was up 21% YoY (4% beat). NIM improvement was aided by

(1) lesser reliance on bulk deposits leading to lower deposit growth and increase in LDR by 149bps QoQ to 83%

(2) soft corporate growth QoQ and healthy RAM accretion. With LCR at 126%, there is more headroom to utilize liquidity for growth. ECL impact is being assessed; however, effect may not be material due to capital release from subsidiary divestment and regulatory dispensation. We keep multiple of 1.4x on Mar’28 core ABV and maintain TP at INR 1,200. Retain ‘BUY

Good quarter with better NII/NIM and asset quality:

NII was higher at INR 469.9bn (PLe INR 459.4bn) due to NIM (calc.) that was a beat at 2.81% (PLe 2.72%); reported NIM was up 5bps QoQ to 2.86%. Loan/deposit growth was 77/177bps lower at 19%/9.7% YoY. LDR was up QoQ from 81.6% to 83.1%. CASA ratio was stable at 37.6% (37.9% in Q4’26). Other income was INR 159.2bn (PLe INR 160.7bn); fee was a 3% miss and TWO recovery was lower. Opex at INR 293.9bn was 1.1% lesser; higher staff cost was offset by lower other opex. Core PPoP at INR 290.6bn was 1.8% above PLe; PPoP was INR 335.3bn. Asset quality improved; GNPA was 1.47% (PLe 1.51%). Gross slippage was lower at INR 73.6bn (PLe INR 92.4bn); recovery was more at INR 35.7bn (PLe INR 22bn). Provisions were INR 50.5bn (PLe INR 45bn). Core PAT at INR 178bn was largely in-line; PAT was INR 211.2bn

Loan growth was mainly led by SME/agri:

Credit growth QoQ was a tad soft at 2.3% QoQ due to lower corporate growth of 1.1%; SME, agri & retail grew by 5.5%/4.7%/2.2%. Corporate growth was subdued QoQ due to transition from T-bill to MCLR leading to increased pricing. SME growth was strong as bank expanded the limit of its automated loan approval platform to cover higher amount of SME loans to enable faster credit decisions and reduced TAT. Xpress credit saw healthy demand, though growth remained below double digits due to rising preference for low-cost gold loans and limited exposure to self-employed. SBI has mobilized ~USD 6bn under FCNR and targets USD 10bn

Reported NIM increases QoQ:

Adjusted for IT refund, reported NIM improved by ~10bps QoQ to 2.85% driven by lower reliance on bulk deposits due to additional liquidity buffer. FY27 NIM guidance is intact at 3%. FCNR based leveraging is not expected to materially impact NIMs, as it would replace trade finance which has similar yields. Fee grew by 21% YoY led by

(1) booking of govt. fees on accrual basis

(2) higher processing fees.

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