SBI maintains FY27 credit growth guidance despite weak Q4, West Asia risks

Mumbai: State Bank of India (SBI) maintained its FY27 credit growth guidance despite risks stemming from the West Asia conflict, even as muted fourth-quarter earnings and continued pressure on margins sent its shares down nearly 7% on Friday.

The country’s largest lender posted a net profit of ₹19,684 crore for the March quarter, up 5.6% from a year earlier but down 6.4% sequentially due to slower growth in net interest income (NII) and treasury losses.

The board of directors of the bank declared a dividend of ₹17.35 per equity share for FY26.

Whole bank net interest margin (NIM) narrowed to 2.81% in Q4 from 2.98% in the preceding quarter and 2.99% a year ago, largely on the back of elevated cost of funds, while net interest income (NII) rose 4.1% year-on-year and fell 1.4% sequentially to ₹44,380 crore.

The NII was nearly 2% below an estimate of ₹46,745 crore by Bloomberg analysts. NIM was projected to remain above 3%.

The bank declared that the notional marked-to-market loss for Q4 was ₹100 crore due to the RBI capping non-deliverable future (NDF) positions of banks. The management expects a hit of another ₹57 crore in Q1 of the current financial year. Total non-interest income fell 6.7% on quarter and 28.9% on year to ₹17,314 crore for the quarter.

SBI shares fell as much as 7% intraday before closing 6.7% lower at ₹1,018.40 on the NSE on Friday, even as the benchmark Nifty 50 dipped 0.62%.

Despite the underwhelming Q4 numbers and uncertainty around risks from the West Asia crisis, the bank maintained its credit growth guidance of 13-15% for FY27.

Speaking to the media in a post-earnings conference, chairman C.S. Setty said credit growth for the banking system as a whole is seen at 13-14% in the current fiscal year, whereas deposit growth is seen at 11-12%.

Setty said asset quality across the banking sector has been holding up “very well”, although the full impact of the West Asia conflict is yet to emerge because of potential second-order effects.

He added that there could be “some impact” on the economy if the conflict continues for 5-6 months and leads to increase in the cost of fuel and causes supply-chain disruptions.

“I believe that the impact is not intense but widespread,” Setty said, adding that clusters such as aviation and hydrocarbon-linked industries are likely to see the maximum impact. In aviation, SBI has exposure to one large airline company, whereas the hydrocarbon industry portfolio—consisting largely of oil marketing companies (OMCs) and large corporations—accounted for 2% of total loans as at the end of March 2026.

Setty said while the bank is currently not looking to shrink its overseas book, the credit environment in GCC (Gulf Cooperation Council) countries is “a little uncertain” and the bank is doing no new business in the region. SBI’s overseas advances grew 20% on-year to ₹7.4 trillion.

For FY26, the lender’s net profit rose 12.9% to ₹80,032 crore, its highest ever. NII for the year was at ₹1.7 trillion, up 4.1% on-year, whereas domestic NIM was at 3.03%, lower than 3.21% in FY25.

According to Yuvraj Choudhary, research analyst at Anand Rathi Securities, SBI’s performance was largely healthy in terms of core operating metrics. Asset quality continued to improve and loan growth was the strongest within large bank peers. Retail term deposit growth also outpaced overall deposit growth, indicating continued traction on liabilities despite tight system liquidity, Choudhary said.

“The key disappointment, however, was on NII and margins, which remain the most closely tracked parameters for banks, especially PSUs,” he said, adding that margin pressure has been visible amid the ongoing rate-cut cycle, as PSU banks tend to transmit lower rates faster than private peers.

“In SBI’s case, the pressure was further driven by strong growth in the corporate book, where yields are relatively lower and highly competitive. The market reaction appears largely knee-jerk, in our view, as the core operating performance remained decent with strong growth and healthy asset quality,” Choudhary added.

Margin outlook

The bank reiterated its guidance of maintaining domestic NIM over 3%, even as Setty admitted that a pick-up in corporate loan growth is expected to put further pressure on margins going forward.

“Corporate growth always will lead to some compression of NIMs because the retail, particularly MSMEs and personal loans, give you a good spread,” Setty said, adding that the corporate portfolio is more relationship-oriented and gives returns in other ways in terms of higher other income or capital efficiency.

The bank has a corporate credit pipeline of ₹5 trillion as of date, and is seeing demand from segments such as infrastructure, renewable energy, conventional thermal power, auto manufacturing, refineries and some fertiliser companies. Much of this demand is from public-sector companies and not the private sector, the bank said.

Credit vs deposit

SBI’s gross advances rose 16.9% on-year and 5.3% on-quarter to ₹49.3 trillion, whereas deposits rose 11% on-year and 4.8% on-quarter to ₹59.7 trillion as at the end of March.

Asked about any concerns regarding deposit growth significantly lagging credit growth, Setty said that savings account deposits have been growing at 10% and current account deposits have grown 5% despite a 21% in government balances after the introduction of the ‘Just in time’ cash management norms.

“We have completely changed our approach towards current account and seen 23% growth in the non-government accounts. So, we are fully satisfied with CASA. I think 39-40% for a book of our size is a phenomenal CASA level,” he said, adding that the bank also has sufficient capital to fund future loan growth including excess statutory liquidity ratio (SLR) of about ₹3 trillion.

“Definitely, yes, we would like to grow more on the deposit side, but obviously we are very conscious of the cost of resources. We will not be aggressively pricing our deposits and focus more on retail mobilisation,” he said, adding that even 11-12% deposit growth should be enough to fund 70% of the credit growth.

As such, the bank will also work to negotiate better pricing for corporate loans to support margins even as cost of funds are expected to remain at the same level.

War impact

On expected capital constraints due to the West Asia war, Setty said that a clearer picture is likely to emerge by July when corporates typically finalise their capital expenditure plans. As such, the bank has so far not seen an increase in working capital drawdowns by corporates, or requests from borrowers for restructuring of loans or any repayment relief.

SBI’s asset quality improved during Q4, with gross non-performing assets (NPA) ratio declining to 1.49% as of 31 March 2026 from 1.57% in the previous quarter and 1.82% a year earlier. Net NPA ratio stood at 0.39%, unchanged sequentially and lower than 0.47% a year ago.

“We have not got any enquiries so far either for additional financing or for restructuring. As we progress, and if the conflict continues, there could be some people approaching us. In the meantime, we are putting policies, procedures, technology, delivery channels, everything available for the ECLGS,” Setty said.

Setty said the bank has identified loans worth ₹70,000-80,000 crore that are eligible under the government’s ECLGS (Emergency Credit Line Guarantee Scheme) announced on Friday.

Bernstein Research said in a note that SBI delivered a mixed Q4 FY26, with loan growth accelerating to around 17% y-o-y but NIM seeing a sharp 18 bps q-o-q decline to 2.93%, the steepest compression amongst large banks. Slippages rose sequentially, though largely seasonal, while headline GNPA improved to 1.49%, the note said, adding that the NIM compression was largely on account of the impact on lending rates from the December repo rate cut.

“Management does not expect further sequential NIM dip from here; repo rate assumed stable through FY27,” it said, adding that the bank is looking to shift T-bill-linked corporate exposures back to MCLR pricing and selective spread expansion in corporate loans to support margins going ahead. “Cost of funds lever is limited; CASA improvement and wholesale deposit run-down to provide marginal relief.”