About the stock: SBI is a public sector bank and also the largest bank in India with a balance sheet size of over ~ ₹66 lakh crore.
• SBI has showcased strength in retail portfolio, best operating metrics in the PSU banking space. Large subsidiaries, strong outlook adds value.
Q4FY25 performance: SBI reported a mixed performance in Q4FY25. Moderation was seen in business growth across both advances and deposits. Credit growth remained broadly in line with the industry at 12.4% YoY, driven by MSME, agri, and retail segments, while corporate growth was slightly slower. Deposit accretion was modest at 9.5% YoY, led primarily by term deposits (11.5% YoY). Asset quality stayed robust with slippages down 4 bps QoQ at 55 bps, GNPA down 25 bps QoQ at 1.82% (led by higher write-offs), and NNPA down 6 bps at 0.47%. However, earnings declined 10% YoY, largely due to elevated provisions at ~60 bps (including frontloading of ~₹6000 crore of provision). Treasury and forex gains and one-off recovery (related to accounting of SR) coupled with steady margin at 3% aided PPoP, while elevated provision led to 10% decline in earnings.
Investment Rationale
• Credit growth outlook steady backed by healthy corporate pipeline and revival in Xpress credit: Management expects to maintain steady credit growth at 12–13% CAGR, supported by a robust corporate pipeline of ₹3.4 lakh crore, and improving trend in Xpress credit. Domestic CD ratio at 69.7% indicates healthy liquidity buffers and ample headroom to fuel incremental growth. Deposit accretion is expected to remain stable, led by continued traction in retail term deposit and calibrated rate adjustments. Revival in Xpress Credit is also poised to aid yields, further strengthening overall outlook.
• CI ratio and asset quality holds firm, despite margin softness: Management anticipates some NIM compression due to rate cuts but expects the impact to be cushioned, given ~29% of loan book is repo-linked, while ~70% is MCLR and fixed-rate, providing a natural hedge. No further SA rate cuts are planned, while repricing of TD remains a key lever to optimize funding cost. Operationally, SBI aims to maintain CI ratio at ~50–51%, prioritizing income growth over aggressive cost-cutting. Asset quality stayed robust with slippages down 4 bps QoQ at 55 bps, GNPA/NNPA down 25 bps and 6 bps QoQ to 1.82/0.47% respectively. Provision increased at ~60 bps, with increase in other provision related to front-loading of anticipated provisions related staff PLI. Bank maintains its guidance to hold NIMs near 3% and RoA is expected to remain steady at ~1% for FY26-27E.
Rating and Target Price
• Moderation in credit growth with relatively resilient margins aided by diversified loan mix and consistent strong asset quality reinforce robust operating profile. Treasury gains remain a catalyst. Thus, we maintain multiple at ~1.1x and assign ₹280 for subsidiaries, thereby revising target price to ₹940 per share. Maintain Buy rating on the stock.