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Earnings in line; growth outlook remains healthy

Asset quality stable

* SBIN reported 1QFY25 PAT of INR170.4b (up 1% YoY, in line), driven by controlled opex. NII grew 5.7% YoY to INR411.3b (4% miss). NIMs moderated 8bp QoQ to 3.22%.

* Opex growth was under control at 1% YoY to INR258.4b (9% lower than MOFSLe), resulting in 5% YoY growth in PPoP to INR264.5b (in line).

* Loan book grew 16% YoY/1% QoQ, while deposits grew 8% YoY (flat QoQ). CASA ratio moderated 41bp QoQ to 40.7%.

* Fresh slippages stood at INR79.03b in a seasonally weak quarter (annualized slippage rate of 0.84%). Credit cost stood at 0.48% vs. 0.32% in 1QFY24. GNPA ratio improved by 3bp QoQ to 2.2%, while NNPA ratio was flat at 0.6%. PCR ratio declined 61bp QoQ to 74.4%.

* We broadly maintain our earnings estimates and expect FY26 RoA/RoE of 1.1%/18.2%. Reiterate BUY with a TP of INR1,015 (1.5x FY26E ABV).

Credit growth guidance at ~15%; margins decline 8bp QoQ

* SBIN reported 1QFY25 PAT of INR170.4b (up 1% YoY, in line), driven by controlled opex, which offset higher provisions. NII grew 5.7% YoY (4% miss), while margins moderated by 8bp QoQ to 3.22%.

* Other income declined 7.5% YoY to INR111.6b (in line). Treasury gains stood at INR25.9b (down 33% YoY).

* Opex growth was under control at 1% YoY to INR258.4b (9% lower than MOFSLe), resulting in 5% YoY growth in PPoP to INR264.5b (in line). C/I ratio, thus, moderated 188bp QoQ to 49.4%. Provisions increased 38% YoY to INR34.5b (12% higher than MOFSLe).

* Advances grew ~16% YoY/1.2% QoQ. Agri grew 17% YoY, retail personal grew 13.6% YoY and SME saw ~20% YoY growth. Xpress loan growth moderated to 11% YoY vs. 20% YoY last year. Deposits saw modest growth at 8.2% YoY (flat QoQ), with the CASA mix moderating 41bp QoQ to 40.7%. The domestic CD ratio, thus, increased to 69.3%.

* Fresh slippages stood at INR79.03b in a seasonally weak quarter (INR76.59b in 1QFY24, annualized slippage rate of 0.84%). Credit cost stood at 0.48% vs. 0.32% in 1QFY24. GNPA ratio improved by 3bp QoQ to 2.2%, while NNPA ratio was flat at 0.6%. Restructured book declined to INR160b (0.4% of advances), while SMA 1/2 portfolio stood at INR46b (12bp of loans). The bank guides FY25 credit cost at 0.5%.

* Subsidiary performance: SBICARD clocked a PAT of INR5.9b (flat YoY). SBILIFE’s PAT grew 36.5% YoY to INR5.2b. PAT of the AMC business increased by 45.6% YoY to INR6.8b, while SBI General reported a profit of INR1,830m (vs. INR1,050m in 4QFY24).

Highlights from the management commentary

* With the implementation of new investment guidelines, there was a net benefit of INR36.73b in reserves, ~10bp on CET-1.

* Provision breakdown: Provision due to increase in slippages – INR9.14b, Aging provisions – INR2.47b, Agricultural provisions – INR1.06b.

* Advances Book breakup: MCLR linked – 36%, EBLR linked – 27%, Fixed book – 20%, T-bill + Others - 14%.

Valuation and view.

SBIN reported an in-line quarter, with PPoP growth driven by controlled opex amid modest revenue growth. Margins moderated 8bp QoQ; however, the bank expects margins to remain broadly stable going forward with variation of ±10bp, aided by levers such as the CD ratio and MCLR repricing. Deposit growth was modest with a slight moderation in CASA mix; however, domestic CD ratio remained well in control at ~69%. Fresh slippages and credit cost increased sequentially in a seasonally weak quarter; however, healthy recoveries and upgrades drove improvement in GNPA ratio. Restructured book was well-managed at 0.4% of advances, while the SMA pool was controlled at 12bp of loans. We broadly maintain our earnings estimates and expect FY26 RoA/RoE of 1.1%/18.2%. Reiterate BUY with a TP of INR1015 (1.5x FY26E ABV).

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