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Informist, Saturday, May. 3, 2025

 

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--SBI: Unanticipated prepayment in corporate segment hit FY25 credit growth 
--CONTEXT: SBI management's comments at post-earnings analyst concall 
--SBI: Elevated provisions in Jan-Mar due to frontloading 
--SBI: Likely to maintain over 1% return on assets irrespective of rate cuts 
--SBI: Expect rebound in express credit on income tax cut in FY26 Budget 
 

 

MUMBAI/NEW DELHI – The State Bank of India's elevated provisions in the March quarter, which also weighed upon its net profit for the quarter, was a strategic move, the management said. The lender's profit for the quarter fell 10% on year as provisions quadrupled.

 

At a post-earnings conference call with analysts Saturday, SBI Chairman C.S. Setty said the bank "frontloaded" some provisioning in the last quarter of the previous financial year. "Our preference is that if any cost is visualised, let us take it upfront. Frontloading the cost has always been our strategy," he said.

 

The banking behemoth's net interest income rose by a mere 2.7% to INR 427.75 billion in the reporting quarter as gross advances grew 12% at the end of March, lower than the expected range of 14-16%. Setty attributed this to unanticipated pre-payments in the corporate segment. "We have done well in many segments except corporate," the chairman said. "We had unusual pre-payments in that segment. Many large central PSUs (public-sector units) have utilised their equity funding to deleverage."

 

Going ahead, SBI expects some rebound in express credit on account of the income tax rebate rolled out in the Budget for the financial year 2025-26 (Apr-Mar). "We have looked at some of the lower segments of customers, though they are (from the) salaried class, the leverage is going up there," Setty said, adding that the credit profile of such customers is likely to improve because of the tax rebate. In the Budget for FY26, the government fully exempted personal income of up to INR 1.20 million per annum from tax. It also restructured the slabs under the new income tax regime, providing benefits of up to INR 110,000 per annum to taxpayers.

 

The bank, which reported a net interest margin of 3.15% in Jan-Mar, expects some pressure on margins going ahead due to likely cuts in the repo rate by the Reserve Bank of India. "The effort will be to protect the NIM at 3% level, but there would be some quarters where we will have some pressure on the NIMs," Setty said. There will be an imperative need to readjust the rates on deposits, and the bank would do that accordingly to maintain the net interest margin, he added. SBI's net interest margin for the March quarter was unchanged from that in Oct-Dec, and was down 32 basis points on year.

 

Setty expects a cut of at least 50 basis points more in the repo rate in the current financial year, starting with a 25 bps cut by the RBI's Monetary Policy Committee in June. But the bank expects to maintain its return on assets at over 1% irrespective of the rate cuts, Setty said.  End

 

Reported by Vidhushi RajPurohit and Krity Ambey

Edited by Rajeev Pai

 

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