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Private capex on the rise; watch on tariffs: SBI’s Setty
- Banks are keeping a watch on the global tariff landscape, he said, after the US unveiled tariffs against three of its top trading partners.
Private sector capital expenditure has begun to pick up, though not so much in core sectors such as steel, State Bank of India chairman C.S. Setty said. However, SBI's corporate credit pipeline remains strong, and the Union budget's effort to raise consumption should prompt industries with capacity utilization close to 75% to expand, he said.
“Private capex is definitely happening. But I think private capital expenditure in the core sector, particularly steel, is yet to pick up,” Setty said at an analysts' call after the bank's December quarter earnings release.
Banks are keeping a watch on the global tariff landscape, he said, after the US unveiled tariffs against three of its top trading partners. "If you see, the export base of India is highly diversified both in terms of geographies and also in terms of the product profile. So, I do not see immediate impact of any of tariffs," he said. However, this could create some uncertainty, and this is something we have to tide over, Setty added.
The bank, India's largest lender, posted a net profit of ₹16,891 crore in the December quarter, up 84.3% from a year earlier. A large part of this was due to a pension burden of ₹7,100 crore in the previous year.
SBI shares closed 1.79% lower on the BSE on Thursday, while the benchmark Sensex index fell 0.27%.
SBI has a corporate loan pipeline of ₹4.8 trillion.
Also read | Are you an SBI customer? Here’s how new chairman C.S. Setty plans to improve your banking experience
"Based on the visibility we have on corporate loan pipeline as well as in terms of what we see in January in retail and home loans, we are confident that we will be sticking to the overall credit growth guidance of 14-16% for FY25,” Setty said.
He added that budget announcements to raise disposable incomes and reduce tax burden will support consumption and demand for credit.
The country’s largest lender recorded credit growth of 13.5% on year, with gross advances crossing the ₹40 trillion mark, led by 14.1% growth in domestic advances. SME loans were up 18.7% on year, agriculture loans 15.3%, corporate loans 14.9%, and retail personal loans 11.6%.
Setty said the bank is focused on improving the yield on advances and controlling the cost of deposits to maintain margins.
“We are not concerned in terms of the gap either widening or narrowing because we have adequate liquidity on our balance sheet. Our credit-deposit (CD) ratio is not very high; so, you still have room to grow there,” he said, adding that this implies that the bank will be comfortable even if deposits continue to grow at the current pace of 10%.
Also read | New SBI chairman Setty has his task cut out
"This 10% deposit growth rate is very comfortable, even if it is 8-8.5%, it will be comfortable. But we would like to maintain the market share because obviously, our deposit mobilization is not only towards funding credit growth, but also to maintain our franchise and the market share,” he said. The bank’s domestic CD ratio was 68.9% as at the end of December.
On the retail loan side, home and auto loans continued to post strong growth.
“What has not gone the way it was growing is the express credit, which is unsecured personal,” Setty said, adding that this includes gold loans and loans against fixed deposits. The bank is making some systemic improvements in terms of delivery of unsecured personal loan and making the customer journey digital.
“The unsecured personal loans in our portfolio is showing good growth in the current quarter, which means that whatever we have had a lower growth rate in the last three quarters, we were able to reverse that,” he said, adding that while the bank may not see the earlier levels of 30-35% CAGR growth in unsecured personal loans, growth is definitely expected to return to double digits.
Net Interest Income (NII) increased 4.1% on year to ₹41,446 crore. Whole-bank net interest margin (NIM) was 3.01% and domestic NIM was 3.15%.
Setty said that more than profitability, the focus is on maintaining the guidance of return on assets (RoA) of 1% and return of equity (RoE) of 15% and above.
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First Published:6 Feb 2025, 09:45 PM IST
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