State Bank of India Q4 FY23 Earnings Conference Call Insights

Key highlights from State Bank of India (SBIN) Q4 FY23 Earnings Concall

Q&A Highlights:

• [00:13:08] An analyst asked about Bank’s expectation for credit growth in FY24 and if there a risk of a material increase or impact on domestic margins due to deposit growth and pricing. Dinesh Khara Chairman said SBIN expects 12-14% credit growth in FY24, with a 16 bp increase in deposit costs and excess SLR reserves of INR4 trillion. The bank aims to balance deposit rates for the benefit of depositors while managing overall resource costs.

• [00:21:29] An analyst asked what provisions has the bank made for the implementation of ECL guidelines and how will it impact existing provisions. Dinesh Khara Chairman said the bank has made provisions of INR2,600 crore for potential future threats and is well-prepared for ECL implementation, with non-NPA provisions estimated to be significantly lower over a five-year period.

• [00:33:10] Vishal from UBS enquired how SBIN tracks the express credit book and the lead indicators that would make the bank worry about it. Dinesh Khara Chairman replied that the bank’s express credit book has a strong performance and security due to its customer base primarily consisting of armed forces, government employees, and reputable corporates, resulting in a low default rate. Furthermore, 95% of the loans are expected to be repaid through salary deductions, ensuring a high repayment rate.

• [00:34:54] Vishal from UBS queried what would trigger a capital raise from here on. Dinesh Khara Chairman said SBIN has reinvested profits, creating value for shareholders without diluting return on equity. With a capital adequacy ratio of 14.68%, it can support loan book growth of INR7.10 trillion without raising additional equity, enabling profit reinvestment.

• [00:38:06] Jai Mundra from ICICI enquired if there a target to increase the fee to asset ratio, given that it has remained stagnant while peers have achieved higher ratios. Dinesh Khara Chairman replied SBIN’s major drivers of fee income are loan processing, cross-selling, and forex income. The bank aims to achieve a billion-dollar-plus income from cross-selling in the medium term and has seen over 25% growth in forex income this year.

• [00:42:19] Nitin Aggarwal at Motilal Oswal asked how is cross-selling approached for YONO customers and what insights can be gained about their deposit balances and behavior over the past few years. Dinesh Khara Chairman replied that YONO is a distribution channel for digital banking customers and the bank uses analytics for targeted marketing. The focus is on frictionless banking and upgrading the platform.

• [00:44:38] Nitin Aggarwal at Motilal Oswal queried when can deposit rates be expected to moderate and will it depend on RBI’s stance or can it happen independently prior to a repo rate reduction. Dinesh Khara Chairman said the moderation in deposit rates depends on factors such as credit deposit ratios and market borrowing conditions. Banks need to balance competitiveness in the loan book with increasing interest rates and providing for potential risks.

• [00:46:16] Sushil Choksey of Indus Equity enquired if SBIN feels credit growth will more front ended in view of election, infrastructure spend etc. Dinesh Khara Chairman clarified that it should be all through the year.

• [00:53:20] VG Kannan asked if there will be a consideration to increase the interest rate on savings bank deposits and its impact on NIM. Dinesh Khara Chairman replied that SBIN does not have any plan to raise the savings bank rate for the time being.

• [00:54:00] Akash Agarwal enquired about the impact of wage revision in total employee cost. Dinesh Khara Chairman answered that total employee cost was INR57,292 crores in FY23. Wage revision was about INR2,490 crores in FY23. So it is 4.35% of the employee cost.