Release Date: May 09, 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 its highest-ever net profit of INR 61,077 crores for FY24, a 21.59% increase year-over-year.
- The bank's net profit for Q4 FY24 stood at INR 20,698 crores, marking a 125% sequential increase.
- Retail, agri, and SME advances crossed INR 20 trillion, with significant growth rates of 14.68%, 17.92%, and 20% Y-o-Y, respectively.
- The gross NPA ratio improved by 54 basis points Y-o-Y to 2.24%, the lowest in over a decade.
- Digital banking initiatives, particularly through YONO, have been successful, with 61% of savings accounts opened digitally in FY24.
Negative Points
- The cost-to-income ratio, including wage revision expenses, stood at 55.66%, indicating high operational costs.
- Current account growth was only 2% for the year, lagging behind the industry average.
- The bank's CET1 ratio, although the highest since Basel III implementation, is still a point of concern at 10.36%.
- There are uncertainties regarding the impact of new RBI guidelines on provisioning for infrastructure project loans.
- The bank's deposit growth of 11% Y-o-Y was slightly lower than the industry average, raising concerns about its ability to attract deposits.
Q & A Highlights
Q: What is the impact of the recent RBI guidelines on provisioning for infrastructure projects?
A: The RBI's discussion paper is still under evaluation. Based on preliminary calculations, SBI is well-positioned to absorb any additional provisions due to its strong balance sheet and existing non-NPA provisions of around INR 32,000 crores. The bank is confident that any required adjustments will not significantly impact its financial stability. (Dinesh Kumar Khara, Chairman)
Q: Can you explain the significant increase in miscellaneous income this quarter?
A: The increase in miscellaneous income is primarily due to higher AUCA (Advances Under Collection Account) recoveries, which were INR 1,000 crores more than the previous quarter. Additionally, dividends from subsidiaries, CMP commissions, and annual maintenance charges contributed to the rise. (Saloni Narayan, Deputy MD of Finance)
Q: What is the outlook for credit growth and capital requirements for the next year?
A: SBI expects to grow its loan book by 13% to 15%. The bank is currently well-capitalized and can support growth without immediate need for significant capital raising. However, it remains open to evaluating options for raising equity if necessary. (Dinesh Kumar Khara, Chairman)
Q: What are the plans for SBI Wealth and its AUM targets?
A: SBI Wealth is being revamped with a focus on premium and wealth banking segments. The bank aims to attract younger customers and expand its services to Tier 3 and 4 cities. The target is to achieve an AUM of INR 1 trillion within a year. (Dinesh Kumar Khara, Chairman)
Q: What will be the run rate for employee expenses following the wage revision?
A: The additional cost due to the wage revision is expected to be around INR 500 crores per month, totaling approximately INR 6,000 crores annually. This is after accounting for the INR 13,000 crores already provided in the previous year. (Dinesh Kumar Khara, Chairman)
Q: What is the outlook for margins assuming no rate cuts?
A: SBI expects its Net Interest Margin (NIM) to remain stable around the current levels. The cost of deposits has plateaued, and the bank aims to maintain its NIM through efficient management of its loan and deposit portfolios. (Dinesh Kumar Khara, Chairman)
Q: What are SBI's plans for expanding services for NRIs?
A: SBI is enhancing its digital onboarding process for NRIs, allowing account creation in as little as 30 minutes. The bank is also expanding its physical presence in regions where regulations permit, to better serve NRI customers. (Dinesh Kumar Khara, Chairman)
Q: How does SBI plan to address the challenges in the CASA growth?
A: SBI is focusing on improving its current account balances through targeted initiatives in trade, commerce, and industry sectors. The bank is also leveraging its cash management products and digital platforms like YONO to attract more CASA deposits. (Dinesh Kumar Khara, Chairman)
Q: What is the expected trend for credit costs and asset quality?
A: SBI aims to keep credit costs as low as possible, targeting around 0.25%. The bank's strategy includes maintaining a strong focus on asset quality and ensuring that NPAs and SMAs remain under control. (Dinesh Kumar Khara, Chairman)
Q: What is the impact of the revised valuation norms on the investment portfolio?
A: The revised valuation norms have been implemented from April 1, and initial estimates indicate a positive impact on the AFS (Available for Sale) reserve. The exact impact will be clearer by the end of the quarter. (Dinesh Kumar Khara, Chairman)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
