{"id":158453,"date":"2024-02-05T12:10:14","date_gmt":"2024-02-05T17:10:14","guid":{"rendered":"https:\/\/44.250.171.167\/?p=158453"},"modified":"2024-02-05T12:10:15","modified_gmt":"2024-02-05T17:10:15","slug":"state-bank-of-india-q3-fy24-earnings-conference-call-insights","status":"publish","type":"post","link":"https:\/\/alphastreet.com\/india\/state-bank-of-india-q3-fy24-earnings-conference-call-insights\/","title":{"rendered":"State Bank of India Q3 FY24 Earnings Conference Call Insights"},"content":{"rendered":"<p><strong>Key highlights from State Bank of India (SBIN) Q3 FY24 Earnings Concall<\/strong><\/p>\n<ul>\n<li><strong>Quarterly Performance<\/strong>\n<ul>\n<li>Net profit for Q3 FY24 stands at INR 9,164 crore, up 20% YoY despite providing for wage revision and pension liabilities.<\/li>\n<li>ROA has improved by 7 bps YoY to 0.94% and ROE has improved by 88 bps YoY to 19.47% for 9MFY24.<\/li>\n<li>ROE growing faster than loan book growth.<\/li>\n<li>Cost-to-income ratio stands at 57.35% excluding one-time pension liability items, with overheads showing sequential decline of 3.1%.<\/li>\n<li>Overall public sector capital investment has jumped 3 times from FY15 to FY25 budget estimates.<\/li>\n<li>Gross tax to GDP projected to touch 11% plus in FY25, highest in 16 years.<\/li>\n<li>Credit growth robust across all segments like retail, agri, SME and corporate.<\/li>\n<li>Deposit growth has rebounded but credit growth momentum has increased deposit-credit wedge.<\/li>\n<li>CET1 ratio at 10.38% after considering 9MFY24 profits; bank open to equity capital raise if growth trends higher.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Asset Quality<\/strong>\n<ul>\n<li>Gross NPA ratio improved by 72 bps YoY to 2.42% in Dec&#8217;23, lowest in over 10 years.<\/li>\n<li>Net NPA ratio improved by 13 bps YoY to 0.64%.<\/li>\n<li>Slippage ratio for 9MFY24 improved by 5 bps YoY to 0.67%.<\/li>\n<li>Credit cost for 9MFY24 stands at 0.25%, improved by 12 bps YoY.<\/li>\n<li>PCR including AUCA stands at 91.49% and PCR for Q3FY24 at 74.17%.<\/li>\n<li>Retail portfolio asset quality is best-in-industry across home loans, cars loans and personal loans.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Digital Banking<\/strong>\n<ul>\n<li>59% of savings accounts opened through YONO in 9MFY24.<\/li>\n<li>Sourced INR 95,000 crore business through analytics, up 37% YoY.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Wage and Pension Provisions<\/strong>\n<ul>\n<li>Provided INR 12,718 crore towards wage revision in 9MFY24 at provisioning rate of 17%.<\/li>\n<li>Additional INR 5,400 crore wage revision provision to be made in Q4FY24.<\/li>\n<li>Provisions to crystallize into actual liability at a later date.<\/li>\n<li>Provided INR 5,400 crore for addressing pension anomaly between employees.<\/li>\n<li>Matter was sub-judice since 2002 and nearing resolution now.<\/li>\n<li>Provided INR 1,700 crore for dearness relief neutralization of pre-2002 pensioners.<\/li>\n<li>Actuarial assessment suggested providing for these likely liabilities.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Credit Cost and Growth<\/strong>\n<ul>\n<li>Strengthened underwriting practices, risk pricing and portfolio mix are keeping credit costs low.<\/li>\n<li>Retail LMS ensures quality control across large network.<\/li>\n<li>Corporate credit committees ensure prudent underwriting.<\/li>\n<li>Expect to grow around 14-15% in line with nominal GDP growth trends.<\/li>\n<li>Selective lending given risk focus, but have capital and liquidity to support 18-20% growth.<\/li>\n<li>ROE targeting over 20%; incremental ROE will support internal capital generation<\/li>\n<\/ul>\n<\/li>\n<li><strong>Liquidity Position<\/strong>\n<ul>\n<li>131% liquidity coverage ratio.<\/li>\n<li>66% credit deposit ratio as of Dec&#8217;23.<\/li>\n<li>No liquidity challenge to support credit growth.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Margins Sustainability<\/strong>\n<ul>\n<li>Expect margins to be maintained around current levels.<\/li>\n<li>Maybe 2-3 basis points dip at maximum.<\/li>\n<li>Most of the deposit repricing of the past is over now.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Interest Rate Outlook<\/strong>\n<ul>\n<li>Expect RBI to cut rates in 2nd or 3rd quarter as inflation heads towards 4%.<\/li>\n<li>Impact on SBI treasury depends on how T-bill and G-sec yields move by Mar&#8217;24.<\/li>\n<li>RBI has decoupled from FOMC; taking decisions based on own assessment.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Productivity Growth<\/strong>\n<ul>\n<li>Employee productivity has jumped from INR 18.77 crore per employee in 2019 to INR 29.78 crore now.<\/li>\n<li>Leveraging analytics, exploring GenAI applications and new technologies.<\/li>\n<li>Multi-pronged approach to stay ahead of opportunities and customer needs.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Cost-to-Income Ratio<\/strong>\n<ul>\n<li>Expect significant reduction in cost-to-income ratio with scale and productivity gains.<\/li>\n<li>Aiming to be the most profitable company in India with potential for INR 1 trillion profit.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Corporate Banking Growth<\/strong>\n<ul>\n<li>Have existing pipeline of INR 4.6 trillion corporate loans.<\/li>\n<li>Will buy wholesale portfolios from constrained private banks if it meets risk appetite.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Staff Cost Analysis<\/strong>\n<ul>\n<li>FY24 staff cost budget is INR 77,127 crore, includes INR 18,127 crore for wage hike impact.<\/li>\n<li>Staff cost includes around 300,000 pensioners which is high.<\/li>\n<li>Improving staff productivity via digital, analytics to moderate cost-to-income ratio.<\/li>\n<li>Additional business from digital channels will fund rising pension obligations.<\/li>\n<li>Very low 1% staff attrition rate also helps cost optimization.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>Key highlights from State Bank of India (SBIN) Q3 FY24 Earnings Concall Quarterly Performance Net profit for Q3 FY24 stands at INR 9,164 crore, up 20% YoY despite providing for wage revision and pension liabilities. ROA has improved by 7 bps YoY to 0.94% and ROE has improved by 88 bps YoY to 19.47% for [&hellip;]<\/p>\n","protected":false},"author":1767,"featured_media":154818,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[9825,392,1],"tags":[9153,10169,1792],"class_list":["post-158453","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-earnings-call-highlights","category-earnings","category-finance-stocks","tag-banks-diversified","tag-earnings","tag-financial-services"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"https:\/\/alphastreet.com\/india\/wp-content\/uploads\/2023\/10\/CC_Image_1.jpg","jetpack_likes_enabled":false,"jetpack-related-posts":[{"id":157981,"url":"https:\/\/alphastreet.com\/india\/axis-bank-ltd-q3-fy24-earnings-conference-call-insights\/","url_meta":{"origin":158453,"position":0},"title":"Axis Bank Ltd Q3 FY24 Earnings Conference Call Insights","author":"Praveen","date":"January 24, 2024","format":false,"excerpt":"Key highlights from Axis Bank Ltd (AXISBANK) Q3 FY24 Earnings Concall GPS Strategy Performance Bank delivered over 18% ROE for last 6 quarters while maintaining better credit profile compared to past. 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