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Informist, Monday, Nov. 3, 2025

 

By Kabir Sharma

 

MUMBAI – A contraction in the net interest margin resulting in lower net interest income is expected to eat into State Bank of India's net profit for the quarter ended September, according to brokerages tracking the lender. SBI's high cost of funds due to the growth in deposits outpacing growth in advances will also weigh on its bottom line, brokerages said. However, lower staff costs and higher contribution from treasury income are expected to support the operating income, limiting the fall in the bank's bottom line. 

The largest bank in the country is expected to report a 1% on-year fall in its net profit to INR 180.39 billion, according to an average of estimates from 11 brokerages. Sequentially, the fall is expected to be steeper, with brokerages expecting a 6?ll in bottom line from the June quarter. Estimates for net profit ranged from a low of INR 160.07 billion by ICICI Securities Ltd. to a high of INR 207.84 billion by Nirmal Bang Equities Pvt. Ltd. 

 

Net interest income, the core income of the bank, is expected to fall 1% on year to INR 416.20 billion in the September quarter, according to the average of estimates from the 11 brokerages. Sequentially, the net interest income won't change much, brokerages said. The state-owned bank is scheduled to declare its Jul-Sept earnings on Tuesday.

 

One key point which all brokerages overlooked will be the income from SBI's stake sale in YES Bank Ltd., which may provide a fillip to the bank's bottom line in the reporting quarter, though this will be a one-time boost. The bank sold a 13.19% stake in YES Bank to Sumitomo Mitsui Banking Corp. for INR 88.89 billion, SBI had informed exchanges in September. SBI has been the largest shareholder of YES Bank since March 2020 after the YES Bank Ltd. Reconstruction Scheme, 2020. As of Jun. 30, SBI held a 23.96% stake in YES Bank and held 7.52 billion shares of the bank. After the divestment, the shareholding of SBI in YES Bank was reduced to 10.8%, the bank said. 

 

Shares of the banking giant have been on an upward journey since it reported its earnings for the previous quarter, rising 17.5% from that day. The bank's stock touched its 52 week-high of INR 952.45 on Monday, and was trading slightly lower at INR 952.05 on the National Stock Exchange at 1330 IST. 

 

Most brokerages expect the bank's net interest margin to contract sequentially, driven by higher cost of funds and the pass-through of policy rate cuts. Nomura sees a 13-basis-point sequential decline in the net interest margin, while Kotak Securities Ltd. expects flat to marginally lower net interest income, despite an 11% on-year loan growth. PL Capital projects a 0.4% quarter-on-quarter fall in net interest income and a slight dip in margins, while Emkay Global Financial Services Ltd. believes margins could expand a bit. The average estimate for the bank's net interest margin is around 3%, with improved yield management cushioning some pressure.

 

Margins took a hit in the June quarter as well, as expected, after the Reserve Bank of India's Monetary Policy Committee cut the policy repo rate by 75 basis points in that quarter alone, following a 25-bps rate reduction in February. The domestic net interest margin shrank 13 bps on quarter to 3.02% in the June quarter, which was sharply down from 3.35% a year ago. Meanwhile, net interest income saw flat on-year growth at INR 410.72 billion. 

 

LOANS AND DEPOSITS

Loan growth is expected to remain subdued to moderate, with most estimates placing sequential growth at around 0.5–1%. Nomura and YES Securities flag that both loan and deposit growth trends have softened, reflecting the broader moderation in credit demand. The nation's largest lender saw its advances grow 11.6% on year to INR 42.55 trillion as on Jun. 30. Domestic advances were at INR 36.20 trillion, totalling nearly a fifth of the banking system's total advances.

 

On the deposit side, the bank is likely to see stable but slower accretion, maintaining a healthy current account savings account ratio of around 40%, as highlighted by Motilal Oswal. SBI continues to hold a 24% market share in deposits and is targeting 10?posit growth over the next two years, the bank's management had said. Total deposits rose 11.7% on year to INR 54.73 trillion as on Jun. 30, with the current account and term deposit growth outpacing overall deposit growth. Savings bank deposits grew only 4.7% on year to INR 17.47 trillion as of Jun. 30. The low cost current account, savings account ratio was 39.36% on Jun. 30, down from 39.97% a quarter ago and also from 40.70% a year ago.

 

ASSET QUALITY AND PROVISIONS

 

Asset quality is likely to remain broadly stable, with further improvement in headline non-performing asset ratios. PL Capital expects the gross non-performing asset ratio to fall 6 bps, while Motilal Oswal Financial Services pegs the gross and net NPA ratios at 1.82% and 0.47% respectively, with a strong provision coverage ratio of 74%. The gross non-performing asset ratio was 1.83% on Jun. 30, almost unchanged from 1.82% on Mar. 31 and down from 2.21% a year ago. The net non-performing asset ratio was 0.47% at June-end, unchanged from a quarter ago and down from 0.57% on Jun. 30, 2024.

 

Provisions are projected to normalise in the September quarter, according to brokerages. Provisions rose sharply by 38% on year to INR 47.59 billion in the June quarter. Of this, provisions for non-performing assets were up 9.2% on year at INR 49.34 billion. The bank's credit cost is expected to remain benign at 0.4–0.5% in the September quarter, according to Nomura. The bank's credit cost had risen to 0.47% as on Jun. 30 from 0.39% a quarter ago, but that was little changed from 0.48% a year ago. 

 

WAY FORWARD

Investors will closely watch the margin trajectory of the bank when it declares its earnings. With interest rates and funding costs evolving, the shrinkage of net interest margin in the June quarter suggests a drag ahead, brokerages said. The bank's margins may remain under pressure unless there is a major relief from the cost of funds. SBI's strength in the retail segment and healthy deposit franchise would likely provide support. If growth accelerates, it can offset margin troubles.

 

Brokerages will also look out for trends in operating expenses. Operating expenses are expected to remain under control, supported by lower staff costs and improved efficiency from SBI's digital leadership via YONO, which now has 88 million users. The key talking points for investors will be the trajectory of net interest margin, deposit mobilisation trends, and credit cost behaviour in the coming quarters. 

 

Following are the Jul-Sept earnings estimates for State Bank of India from 11 brokerages in descending order of the estimate of net profit in INR million:

 

Brokerage	Net interest income (in INR million)	Net profit (in INR million)
Nirmal Bang Equities Pvt. Ltd.	409,693	207,844
Anand Rathi Share and Stock Brokers Ltd.	426,308	197,445
Emkay Global Financial Services Ltd.	411,717	187,708
Nuvama Wealth Management Ltd.	412,800	185,785
Kotak Securities Ltd.	400,899	184,568
Nomura Equity Research	414,400	177,300
JM Financial Institutional Securities Pvt. Ltd.	411,650	177,025
Prabhudas Lilladher Pvt. Ltd.	415,200	175,727
Motilal Oswal Financial Services Ltd.	405,757	167,274
YES Securities (India) Ltd.	416,811	163,513
ICICI Securities Ltd.	4,6,312.	160,071
Average	411,958.82	180,387.27

 

End

 

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Edited by Tanima Banerjee

 

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