State Bank of India Quarterly Results Q3 FY 25 stock analysis

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Sector Outlook: Positive

Net profit up 84% YoY, Decent performance across all segments

The bank’s Net Interest Income was ₹41,446 crores, slightly lower by 0.4% from the previous quarter but 4.1% higher than last year. Operating expenses rose 4.9% from last quarter but dropped 6.5% year-on-year. The Pre-Provision Operating Profit (PPOP) was ₹23,551 crores, down 19.6% from the last quarter but up 15.8% from last year. Net profit stood at ₹16,891 crores, down 7.9% quarter-on-quarter but up 84.3% year-on-year, mainly due to a one-time pension-related gain of ₹7,100 crores in Q3FY24. Provisions fell 39.3% from last quarter but increased 63.5% from last year. The CASA ratio was 39.2%, slightly lower than the previous quarter and last year. Return on Assets (ROA) was 1.04%, while Net Interest Margin (NIM) was 3.01%, both declining from the previous quarter. Gross advances reached ₹40,04,567 crores, an 8.1% increase from last quarter and 13.8% from last year. SME advances grew the most at 18.71% YoY, followed by agriculture (15.31%), corporate (14.86%), and retail personal advances (11.65%). Gross deposits stood at ₹52,29,384 crores, rising 6.4% from last quarter and 9.8% from last year, with CASA deposits growing 4.46% YoY. The Capital Adequacy Ratio (CAR) was 13.03%, while Gross and Net NPA stood at 2.07% and 0.53%, respectively, improving from last year.

Key Concall Highlights

The company had a strong Q3FY25, helped by October’s wedding season, which boosted consumer spending.
Margins were squeezed due to higher resource costs and lower treasury gains.
Despite a 32 basis point drop in yields, NIM only declined by 8 basis points, showing the company’s ability to manage costs and protect margins.
The company is developing AI at the enterprise level, with applications in personalization, staff training, knowledge management, and risk management.
Auto loans grew 10% year-on-year, with a loan portfolio of ₹1.24 lakh crore, maintaining market leadership.
Home loans increased by 14-15%, reaching ₹8 trillion, the largest in the market, with NPAs at 76 basis points.
AI will be used to enhance employee learning and training.
The chairman introduced two new term deposit products to attract more savings and CASA deposits.
The company faced mark-to-market losses in Q3FY25 due to unfavorable U.S. dollar and interest rate movements, but these losses are expected to be temporary.
A potential rate cut could lower resource costs and stabilize margins.
Higher consumer demand is expected to drive growth in Xpress credit, the company’s unsecured personal loan segment.
The bank is adding more staff in high-potential branches to improve customer service.
It is also using outsourced “feet on the street” agents to strengthen customer interactions.
The “Ask SBI” initiative will help staff answer customer queries more effectively using standard procedures.

Valuation and Outlook

In Q3FY25, State Bank of India (SBI), the largest public bank in the country, performed well due to steady growth in net interest income, strong fee income, and lower credit costs compared to competitors. Its loan growth was slightly above the industry average, while deposits grew in line with the market, mainly from term deposits. The bank aims for double-digit deposit growth, leveraging its strong brand. Although costs have risen, the cost-to-income ratio is improving and moving toward the management’s 50% target. Previously, SBI expected 14-16% growth, so any updates to this forecast will be important. With expected interest rate cuts, net interest margins (NIM) may be affected since 28% of loans are linked to the repo rate, but the impact should be short-term as loans can be repriced quickly. Despite some pressure on asset quality, SBI is handling it well with lower bad loans and credit costs. Overall, SBI met expectations, and future updates on margins, credit quality, and deposit growth will be key.