SBIN Q4 Call Highlights: Sustaining ROA, Cost Efficiency, and AI-Powered Banking Future!

State Bank of India, India’s largest public sector lender, in its Q4 earnings call highlighted its operating profit exceeding INR1 lakh crore despite credit growth of 12% falling short of the 14-16% target, with net profit appearing down 10% quarter-over-quarter due to front-loaded provisions. Management discussed maintaining their 1% ROA target despite anticipated repo rate cuts affecting margins, while explaining that foreign branch growth outpaced domestic operations. The bank addressed asset quality issues, including National Asset Reconstruction Company Limited (NARCL) transfers with new Security Receipt (SR) provisioning changes, and outlined strategies to revive express credit growth after recent slowdown. Management also discussed a 25,000 crore enabling resolution for potential equity raising, book value calculation methodologies, treasury operations expected to benefit from rate cuts, and the bank’s strategic AI adoption roadmap focused on improving operational efficiency.

State Bank of India reported a mixed performance in its Q4 earnings, with a consolidated net profit of INR20,379 crore, down 8% year-on-year, primarily due to higher provisions, though it rose 10% quarter-on-quarter. Net interest income grew 2.7% year-on-year, driven by a 12.03% year-on-year increase in gross advances to INR40.48 lakh crore, but net interest margins remained under pressure at 3.15% domestically, reflecting higher deposit costs. Operating profit surged 9% year-on-year, supported by strong core income. Asset quality improved significantly, with gross NPA dropping to 1.82% from 2.07% quarter-on-quarter and net NPA to 0.47% from 0.53% quarter-on-quarter, backed by a provision coverage ratio of 74.66%. Deposits grew 9.48% year-on-year, but the CASA ratio declined to 39.20% from 41.18% year-on-year. Over the quarter, SBI announced capital-raising plans via equity issuance, partnered with the Land Ports Authority to enhance services.

Continue Reading: Unearth the Vital Insights from State Bank of India’s Earnings Call!

Financial/Operational Metrics:

• Revenue: INR1,26,997 crores, up 8% YoY.
• Net Income: INR20,379 crores, down 8% YoY.
• EPS: INR21.96, down 8% YoY.
• Interest Income: INR7,160 crore, up 15%.

Outlook:

• ROE Goal: Sustain ROE greater than 15% through business cycles.
• Cost Efficiency: Intend to improve cost-to-income by increasing income.

 

Analyst Crossfire:

• Credit Growth Shortfall and Net Profit Drop (Ashok Ajmera – Ajcon Global)? SBI initially targeted 14–16% credit growth but ended at about 12%. This was mainly due to large, unanticipated prepayments in the corporate segment, especially from central PSUs using equity to deleverage. Despite operating profit increasing 9%, higher provisions led to a YoY Q4 net profit drop. SBI prefers front-loading provisions for long-term strength rather than smoothing earnings (Dinesh Khara – Chairman).

 

• Treasury Gains Outlook & Employee Expense Increase (Ashok Ajmera – Ajcon Global)? With rate cuts expected, SBI anticipates favorable treasury performance, both in trading and MTM gains, but refrained from giving specific guidance. Q4 wage costs appeared high due to annual provisioning like PLI. For FY25, a 6% YoY increase in staff expenses is expected (Dinesh Khara – Chairman, Kameshwar Rao – CFO).

 

• Foreign Branch Growth & Equity Raising Plan (Manoj Alimchandani – Analyst)? SBI’s foreign branches outpaced domestic growth due to stronger demand in certain geographies. Management sees this as sustainable and part of diversified global operations. INR25,000 crore equity raising is an enabling resolution, not a necessity. SBI has sufficient capital (14.2% CAR) and headroom for INR8 lakh crore loan growth (C.S. Setty – MD, Dinesh Khara – Chairman).

 

• Savings Deposit Rates Strategy & Recovery from Written-Off Accounts (Bhavik Shah – InCred Capital)? No immediate plan to cut savings bank interest rate; future decisions will be based on Asset-Liability Committee (ALCO) reviews and broader rate environment. Sustained performance driven by small-ticket recoveries and reintroduction of regional stressed asset offices (Kameshwar Rao – CFO).

 

• Staff Cost Outlook, Short-Term Deposit Rates & Liquidity (Bhavik Shah – InCred Capital)? Staff costs dropped due to reduced provisioning; next year’s staff expense expected to show modest growth with wage settlement impact already absorbed. SBI paid higher short-tenor deposit rates to manage liquidity; rates will be revisited in upcoming ALCO meeting (Dinesh Khara – Chairman).

 

• Forex Income Volatility, AI Strategy & Operational Efficiency (Kunal Shah – Analyst)? Volatility in forex markets drove the rise in income; difficult to predict normalized levels. SBI sees AI as critical for scale; early adopter in predictive AI, aiming for enhanced efficiency across fraud detection, credit, and operations (Dinesh Khara – Chairman).