Mumbai: State Bank of India is expected to report a resilient fourth-quarter (Q4FY26) on Friday, with strong credit growth and steady asset quality offsetting pressure on treasury income and margins from the recent interest rate cycle, according to four brokerages.
Analysts expect India’s largest lender to continue outperforming peers on loan growth and net interest margin (NIM) stability, even as higher bond yields weigh on treasury gains during the January-March quarter.
“Broad-based loan growth at 17% year-on-year and 5% quarter-on-quarter. NIMs to remain steady as yield repricing offset by cost of funds reduction; NIM performance most resilient among PSU peers. 4Q PAT headwind is treasury-driven as government securities yields have hardened,” Nomura Global Markets Research said in a pre-earnings note on 5 April.
Kotak Institutional Equities expects the bank’s operating profit to decline 11% year-on-year, primarily due to weaker treasury income. “We are building in 5% on year NII growth despite 14% on year loan growth due to higher cost of funds and pass through of recent rate cuts,” the brokerage said. It also said that fee income growth could moderate during the quarter.
For the quarter ended December, the bank’s net interest income rose 9% on year to ₹45,190 crore. Consequently, net interest margins were at 3.12% as against 3.09% a quarter ago.
The management had indicated that margins are likely to remain above 3% over the medium term, aided by a strong current account and savings account franchise and favourable loan mix.
Brokerages also expect margins to remain broadly stable despite policy rate transmission. The Reserve Bank of India had cut policy rates by 25 basis points in December.
Motilal Oswal Financial Services expects SBI’s NIM to sustain at 3% amid yield repricing. Systematix Institutional Equities said that a stable cost of funds would more than offset the decline in yield on assets, resulting in marginal NIM improvement.
Despite profitability pressures, brokerages remain constructive on SBI’s core business momentum. Motilal Oswal said the lender’s sequential credit growth is likely to be driven by broad-based growth in small and medium enterprises, corporate loans, and Xpress credit.
The bank’s loan book grew over 15% on year to ₹46 trillion and deposits rose 9% on year to ₹57 trillion at the end of December. For FY26, SBI has already guided for 13-15% credit growth led by a strong corporate loan pipeline of nearly ₹7.9 trillion and rising traction in sectors such as data centres, green energy and working capital financing. The management’s outlook on the same will be keenly watched.
Brokerages said the bank continues to focus on improving deposit granularity through retail mobilisation and digital channels amid intensifying competition.
Asset quality
Overall, asset quality is expected to remain a key positive. SBI’s gross and net non-performing assets ratio had declined to multi-decade lows of 1.57% and 0.39%, respectively, in the previous quarter. Motilal Oswal expects steady credit cost and return on assets to sustain at 1.1%, while Nomura sees credit costs remaining contained at around 40 bps.
However, some moderation in recoveries and upgrades may weigh on provisions. Kotak said it expects slippages at 0.9% of loans, but no fresh concerns are likely in any portfolio for the bank.
Systematix also echoed a similar view, expecting provisions to be higher sequentially leading to higher credit costs.
Investors will closely watch management commentary on the impact from the West Asia war, NIM trajectory, treasury performance and loan growth outlook for FY27.