SBI Ltd Quarterly Results Q1 FY 26 stock analysis

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Sector Outlook: Positive

Demand softness dents sales; One offs drive profitability

Net Interest Income (NII) for Q1FY26 stood at Rs. 41,072 crores, marking a 4.0% sequential decline and a marginal 0.1% YoY decrease, primarily due to NIM compression from higher funding costs despite steady credit growth. Operating expenses totaled Rs. 27,874 crores, reflecting a sharp 21.9% QoQ decline but a 7.9% YoY increase, with the sequential drop attributed to normalization after Q4’s elevated insurance-related and other costs. Pre-provision operating profit (PPOP) came in at Rs. 30,544 crores, down 2.4% QoQ but up 15.5% YoY, driven by healthy other income and controlled operating expenses. Provisions for the quarter were Rs. 11,384 crores, showing a 10.0% sequential decrease but a 20.9% increase YoY, signaling a cautious stance.

Net interest margin (NIM) stood at 2.90%, down 10 basis points QoQ and 32 basis points YoY. Net profit (PAT) for the quarter was Rs. 19,160 crores, up 2.8% QoQ and 12.5% YoY, benefiting from lower sequential provisions. Return on assets (ROA) increased slightly to 1.14%, up 2 bps QoQ and 4 bps YoY. The CASA ratio stood at 39.4%, down 57 bps QoQ and 130 bps YoY. Gross advances grew by 0.8% QoQ and 11.9% YoY, with retail and MSME lending driving growth, while corporate loan growth remained muted. Gross deposits increased by 1.7% QoQ and 11.7% YoY, bolstered by term deposit accretion. The capital adequacy ratio (CAR) was 14.63%, improving 38 bps QoQ and 77 bps YoY, reflecting a solid capital buffer. Gross NPA stood at 1.83%, up 1 bps QoQ but down 38 bps YoY, while Net NPA remained stable at 0.47%, down 10 bps YoY, indicating continued asset quality strength.

Valuation and Outlook

The company delivered a mixed performance in Q1FY26, with the topline coming in below expectations due to tepid domestic volumes and underperformance relative to the industry. However, the quarter was marked by a resilient operating performance, with gross and EBITDA margins expanding on the back of favourable raw material costs and better cost control, particularly in the Agriculture Machinery segment. The sharp jump in PAT was aided by exceptional gains, though core profitability remained broadly in line with expectations. While Q1 saw muted revenue performance, we believe Escorts Kubota is well-placed for a gradual recovery in H2FY26, supported by a strong pipeline of new launches across brands (Promaxx, MU Series, Wetland). These are expected to aid market share gains, particularly in under-penetrated southern and eastern markets. Export momentum remains healthy, with management targeting 25–30% YoY growth in FY26 and a medium-term contribution of 15% to total revenue, aided by rising integration with Kubota’s global network. The Construction Equipment segment is expected to rebound post-monsoon as emission-related transition impacts subside and government-led infrastructure activity picks up. While input costs are firming up, with the impact likely to be felt from Q2 onwards, and the drag from the unfavourable regional mix expected to persist in the near term, management has retained its EBITDA margin guidance of 12–12.5% for FY26, supported by new product launches, cost discipline, and operating leverage. Overall, EKL remains well-positioned, with improving fundamentals and medium-term levers for profitable growth in place.

Key concall Highlights

State Bank of India (SBI), the country’s largest public sector bank, delivered a muted performance in Q1FY26, with soft loan growth and a reduction in provisions supporting profitability. Credit growth across the overall banking industry remains subdued, and SBI’s performance was broadly in line with industry trends. Loan growth momentum was driven by strong double-digit YoY expansion in SME, retail, and personal banking segments, while corporate loan growth stayed muted as large borrowers increasingly turned to market-based funding instruments. This mix suggests that the credit portfolio is gradually strengthening. Asset quality was a key positive during the quarter, with improvements across Gross and Net NPAs, strong recoveries, and credit costs remaining under control. The cost-to-income ratio reverted to a comfortable range after the spike seen in the previous quarter. On the margin front, NIMs came under pressure due to a rate cut and lagged deposit repricing. Management has guided for a full-year NIM of 3%, though its achievability in FY26 will need close monitoring. Margins are expected to remain under pressure in the current interest rate environment, with the extent of compression yet to be quantified. Overall, the results were broadly in line with expectations. While the outlook for growth and margins remains muted, the sustained improvement in asset quality provides a measure of comfort, and we maintain a neutral stance going forward