- Net Profit: INR 17,035 crores, an increase of 0.90% YoY.
- Operating Profit: INR 26,449 crores, an increase of 4.55% YoY.
- ROA: 1.10% for Q1 FY25.
- ROE: 20.98% for Q1 FY25.
- Cost-to-Income Ratio: 49.42%, improved by 95 basis points YoY.
- Net Interest Income: Increased by 5.71% YoY.
- Operating Expenses: Increased marginally by 0.65% YoY.
- Deposits Growth: 8.18% YoY.
- Term Deposits Growth: 12.20% YoY.
- CASA Deposits Growth: 2.59% YoY.
- Domestic Advances Growth: 15.55% YoY.
- Retail Personal Advances: INR 13.7 trillion, growing at 13.60% YoY.
- Agri Advances: INR 3.09 trillion, growing at 17.06% YoY.
- SME Advances: INR 4.43 trillion, growing at 19.87% YoY.
- Corporate Segment Growth: Almost 16% YoY.
- Foreign Offices Advances Growth: 14.41% YoY.
- Foreign Offices Deposits Growth: 10.48% YoY.
- Liquidity Coverage Ratio: 129% as of June 30, '24.
- Domestic CD Ratio: 69.28%.
- YONO Registered Customers: 48 crore.
- YONO Business Users: More than 29 lakh.
- Gross NPA Ratio: 2.21%, improved by 55 basis points YoY.
- Net NPA Ratio: 0.57%, improved by 14 basis points YoY.
- Slippage Ratio: 0.84%, improved by 10 basis points YoY.
- PCR Including AUCA: 91.76%.
- PCR Excluding AUCA: 74.41%.
- Capital Adequacy Ratio: 13.86%.
- CET1 Ratio: 10.25%.
Release Date: August 03, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- State Bank of India (BOM:500112, Financial) reported a net profit of INR 17,035 crores for Q1 FY25, showing a 0.90% increase over Q1 FY24.
- Operating profit increased by 4.55% YoY to INR 26,449 crores.
- The bank's ROA remains strong at 1.10% for Q1 FY25, and ROE stands at 20.98%.
- Gross NPA ratio improved by 55 basis points YoY to 2.21%, the lowest in over 10 years.
- The bank's digital banking platform, YONO, continues to gain traction with 48 crore customers registered and 63% of new savings accounts opened through the platform.
Negative Points
- Slippages during the quarter were noted, with some attributed to seasonal factors and delayed salary credits in certain states.
- Operating expenses increased marginally by 0.65% YoY.
- The cost-to-income ratio, although improved, still stands at 49.42%, indicating room for further efficiency.
- Net interest income growth was modest at 5.71% YoY, reflecting some compression in net interest margins.
- The bank faces challenges in deposit growth, with deposits growing by 8.18% YoY, which is lower than the credit growth of 15.55%.
Q & A Highlights
Q: Sir, my question on the slippages during the quarter. So we have seen some uptick. Is it largely seasonal in nature or due to election or heat wave impacting retail collection during the quarter?
A: As far as the slippage in the first quarter is concerned, I would actually split them into two or three reasons. One, these are the aging provisions on the standard assets. Our book is growing, so that is one of the reasons. The second reason is some slippages in the unsecured personnel due to delayed credit of salary in some states. However, the slippage ratio has improved compared to previous years, and out of the INR7,900 crores slippages, almost INR1,600 crores have already been pulled back.
Q: Given the current macroeconomic scenario, we have seen 15% loan growth and 8% deposit growth. How do you see the deposit increase in the bank in the rest of the current financial year? And do you see the further cost of deposit to increase for the bank?
A: We are at about 68% CD ratio. Though our cost for deposit has gone up by about 45 basis points, our NIM compression has only been 11 basis points. We are mindful of the depositors' interests and have increased interest rates in some buckets to ensure the franchise value stays intact. We are opening about 60,000 savings bank accounts daily, with a significant portion through YONO. We are also taking various initiatives for current accounts and leveraging analytics to understand savings account behavior.
Q: What is your outlook on margins given the deposit challenge for the sector and potential rate cuts?
A: Our effort is to keep NIM at the current level, with potential variations not exceeding 10 basis points. Despite an increase in term deposit rates, our NIM compression has been minimal due to our judicious strategy. We aim to maintain this trajectory.
Q: Can you provide some color on the unsecured Xpress Credit book, its average ticket size, and the composition of borrowers?
A: The average ticket size of Xpress Credit is INR7.18 lakh. The composition of the book remains the same, primarily targeting salary account holders. We are mindful of RWA consumption and are strengthening our digital offerings in this space.
Q: What steps is the bank taking in agri lending business to deliver much lower GNPA in the future?
A: We have initiated a special drive and time-bound action plan for conducting regular recovery-cum-credit camps. We are focusing on higher-value ticket size loans, which have shown lower NPA incidence, and leveraging analytics for better management.
Q: What are the key components of the bank's credit growth aspirations?
A: We are hoping for a 15% credit growth, with broad-based growth across all segments. Our proposals in the pipeline, including sanctions and disbursements, are around INR4.6 trillion, with a significant portion from the private sector.
Q: How is the bank addressing the deposit crisis?
A: We are focusing on digital initiatives, opening a significant number of savings bank accounts daily, activating inoperative accounts, targeting quality salary packages, and raising deposit interest rates in select tenors. We are confident these measures will yield results.
Q: What is the guidance on NIM in the coming quarters and the effect of rate cuts on NIM?
A: Our target is to maintain NIM at the current level, with potential variations not exceeding 10 basis points. We are leveraging a judicious strategy to manage deposit costs and maintain NIM.
Q: What are the top three risks you visualize for FY25 over the medium term for the banking sector?
A: The risks include price risk in long-term projects, execution risks, and potential regulatory changes. We are mitigating these risks through sensitivity analysis, sector consultants, and strengthening our internal structures.
Q: What is the sustainable level of credit costs going ahead?
A: We expect the credit cost to be around 0.50% going forward. We are maintaining prudent provisioning practices to ensure the balance sheet remains healthy.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
