State Bank of India (SBI) delivered an earnings beat in the June quarter (Q1FY27), with standalone net profit rising 10% year-on-year to ₹21,121 crore, aided by stronger margins, treasury gains and improved operating efficiency. The stock has given up its initial gains after the results, taking its 1-year return to roughly 31%.
Net interest income (NII) rose over 14% to ₹46,992 crore, while operating profit increased almost 10% to ₹33,529 crore. SBI’s domestic net interest margin (NIM) expanded 7 basis points to 3.0%—a relief after the previous quarter’s compression.
The management attributed the sequential NIM improvement in Q1FY27 largely to lower cost of funds. In the currently competitive deposit environment, SBI has consciously avoided chasing expensive wholesale deposits, instead relying on its growing retail franchise. While overall deposits grew less than 10% over the year-ago period, retail term deposits rose 14%.
Credit accelerates
On a favourable base, advances expanded 19% year-on-year to ₹50 trillion, led by agriculture (+25%) and SME (+22%). Corporate loans grew 18% year-on-year, but were flat sequentially as the bank migrates part of its corporate loan book from T-bill-linked pricing to MCLR. While this can protect yields, corporate loan growth will need to be monitored.
Retail advances grew the slowest at 15%, even as gold loans nearly doubled by cannibalizing part of Xpress Credit, owing to almost 300 bps lower interest on gold loans. Gold loans now account for 2.5% of the book, up from 1.5% a year ago. But the management clarified that gold loans are not part of its core portfolio, and the growth has been opportunistic.
The bank is working on expanding its collection mechanism to increase penetration in high-yielding retail loans to self-employed and professionals, growing beyond its current concentration in salaried employees.
With deposits growing significantly slower than advances, the credit-deposit ratio (CDR) has expanded to 83%. Domestic CDR is lower at 74%, leaving enough room for credit growth.
Moreover, the management expects to mobilize around $10 billion of FCNR(B) deposits following $6 billion in Q1. This should help diversify funding without materially affecting margins.
Asset quality holds
On asset quality, seasonal agricultural stress weighed on sequential trends. Fresh slippages rose to ₹7,046 crore from ₹5,521 crore in Q4FY26, but lower than the ₹7,945 crore in the year-ago quarter. Around ₹1,500 crore had already been recovered or upgraded after quarter-end.
Anand Rathi maintains that SBI’s asset quality remains best-in-class, with gross and net slippages coming in at 60/31bps, materially better than large private peers at 107-180bps/54-112bps.
Gross and net non-performing assets continued to decline to 1.47% and 0.38%, respectively. Provision coverage was stable at around 74%. The management assured that no major impact is seen from upcoming expected credit loss provisions.
Fee income rises
Fee income, which saw a ₹500 crore sequential uptick due to a change in accounting treatment, can expand from 15% to 20% of fees ahead.
FY27 credit-growth guidance stands at 14-15%, anchored to expected nominal GDP growth. Domestic NIM is expected to remain around 3%.
At 1.5x FY28 adjusted book value per Bloomberg, SBI is no longer the deep-value play it once was. However, the valuation still appears reasonable relative to its improving return profile.