SBI Eyes Double-Digit Growth, Stable Margins Ahead

Ashwin Thakker

— 2 min read
  • Full year credit growth targeted at 12-13%, with corporate growth at 10-11% and SME at 19-21%.
  • Domestic Net Interest Margin (NIM) guidance maintained at 3%, with a U-shaped recovery expected from Q3-Q4 FY26.
  • Return on Assets (RoA) reaffirmed at 1% and above.
  • Slippage ratio targeted below 0.6%.
  • Cost to Income ratio aimed to be maintained below 50% through the cycle.

State Bank of India (SBI) reported a Q1 FY26 net profit of ₹19,160 crores, up 12.48% YoY, underscoring its resilient performance. During its latest earnings call, management provided comprehensive guidance on key financial metrics and strategic initiatives for the upcoming fiscal year, emphasizing sustainable growth, margin stability, and continued digital transformation. The bank remains confident in its ability to navigate the evolving economic landscape.

Strategic Credit Expansion and Robust Asset Quality

SBI outlines a clear path for credit expansion, projecting full-year growth between 12-13%. This is expected to outpace both nominal GDP and overall industry growth. The bank anticipates corporate credit growth to be around 10-11% for the year, bolstered by government capital expenditure pipelines and green energy projects. Retail mortgages have already shown strong performance, growing at 15% year-on-year, and the bank expects unsecured personal loans and auto loans to see a pickup in the second half of the year. SME segment growth is robust at 19-21%.

"Looking ahead we expect credit expansion to outpace both nominal GDP and industry growth driven by calibrated exposure to consumption linked retail loans, government CapEx pipeline and green energy projects."

On asset quality, SBI maintains a positive outlook. Despite a marginal increase in Q1 FY26 slippages to ₹7,945 crores, the bank reiterated its commitment to keeping the slippage ratio below 0.6%. Management expressed confidence, stating there is "no concern on the asset quality in any of the segments." The bank's prudent underwriting, especially in SME lending supported by its Business Rule Engine and CGTMSE guarantee, provides a strong protective layer against potential risks.

Sustaining Margins and Enhancing Efficiency

SBI's Net Interest Margin (NIM) guidance for domestic operations remains at 3%. The bank expects a U-shaped NIM trajectory, with a potential dip in Q2 followed by an improvement from Q3-Q4 FY26. This anticipated recovery is driven by the repricing of deposits, particularly fixed deposits, and the full benefit of savings bank account rate reductions. The CRR (Cash Reserve Ratio) cut, releasing approximately ₹52,000 crores, is also expected to contribute positively to NIM.

"As far as margin outlook, we are still standing by our 3% guidance on NIM... I think it will definitely improve from Q3 to Q4 for 2-3 reasons, one is the deposits get repriced..."

Operational efficiency remains a key focus. The bank aims to maintain its cost-to-income ratio below 50% through the cycle. Initiatives like Project SARAL, focused on re-engineering operational processes, are designed to enhance productivity and optimize resources through simplification, automation, centralization, and leveraging modern technological tools, including AI. The bank's substantial capital buffer, augmented by a successful QIP, further supports its growth plans without liquidity constraints.

SBI's Q1 FY26 earnings call highlighted a strategic forward-looking approach focused on sustainable growth, disciplined asset quality management, and operational efficiency. The bank's reaffirmed guidance for double-digit credit growth, stable NIM, and robust RoA reflects its strong market position and adaptability. Continued investment in digital transformation and AI integration positions SBI to enhance customer service and maintain its competitive edge in the evolving banking landscape.

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