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What the record says.
SBI reported Q2 FY24 PAT of INR 14,330 crore (+8% YoY), with domestic NIM at 3.43% (down 12bps YoY) due to higher deposit costs. Operating profit fell 8% YoY to INR 19,407 crore, impacted by a INR 3,417 crore additional wage provision. Asset quality improved: GNPA at 2.55% (lowest in 10+ years), credit cost at 0.22%. Domestic advances grew 13.2% YoY, led by SME (+22.75%) and retail (+15.68%). Management expects NIM compression of 3-5bps more, then stabilization. Loan growth guidance of 12-14% is supported by a strong pipeline (INR 4.8 trillion). Key risk: potential RBI risk weight increase on small-ticket unsecured loans, though SBI's exposure is minimal.
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Guidance to track
- Management expects domestic NIM to decline by another 3-5 basis points from current 3.43% and then stabilize around that level by year-end.
- Management expects overall loan growth in the range of 12-14%, with potential to surprise on the higher side.
- SME advances are expected to reach INR 4 trillion by FY24, driven by analytics-led products and improved infrastructure.
- With profit plough-back, CET1 ratio is expected to improve to over 11% by March 2024, from current 9.94%.
Risks flagged
- RBI may increase risk weights on small-ticket unsecured loans (below INR 50,000), which could impact capital requirements, though SBI's exposure is minimal.
- If wage settlement exceeds the assumed 14%, additional monthly cost of ~INR 100 crore per 1% increase could pressure operating expenses.
- Domestic NIM may compress further by 3-5bps as deposit costs continue to reprice, though management expects stabilization.
- Global uncertainties and Middle East conflict could affect the international loan book, though management is focusing on stable geographies.
Key quotes
- My expectation is that our margin should be around this level, or maybe it might see compression for another 3-5 basis points.
- We have been indicating that we'll be growing at about around in the range of 14%, and I would like to surprise the market on the higher side.
- Our gross NPA ratio has improved by 97 basis point YoY, and stands at 2.55%, and continues to be at its lowest level in more than 10 years.
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