After stellar FY24, SBI aims better show in next fiscal
tively to the numbers, with the bank’s shares on BSE closing 1.14% higher at ₹819.65 on Thursday.
Given the growth trajectory, the bank could look at raising more capital through channels that could include equity as well as additional tier-I bonds. “The bank is open to raising equity capital if the growth trends so warrant,” said Khara.
SBI’s total capital adequacy ratio stood at 14.28%, 40 basis points (bps) lower than the same period last year. A bps is one-hundredth of a percentage point. Capital adequacy ratio is the ratio of a bank’s capital to its risk-weighted assets, and indicates how easily a bank can meet its obligations.
Khara’s optimism is based on the broad-based growth the bank saw in the loan portfolio in the three months through March. While retail loans grew 14.7% y-o-y, corporate loans were up 16.2%. Small businesses and agriculture sectors, too, were strong contributors, growing 20.5% and 17.9%, respectively. This led to the bank’s overall loan book in India expanding 16.3% y-o-y as on 31 March. “We are seeing (corporate) growth (also) coming from the conventional industries,” said Khara.
The SBI chairman is also banking on the multiplier impact of infrastructure spending to propel economic growth. “The multiplier component of infrastructure spending is almost four times, which actually means that once infrastructure is given a push, it gives a significant push to all other investments,” said Khara.
To be sure, while the government has been pushing more spends in the infrastructure sector, private sector capital expenditure has not kept pace with expectations.
According to Khara, the bank is seeing credit demand coming from industries like batteries, electric vehicles and semiconductors. SBI has a loan pipeline—those that are sanctioned but are yet to be used— of ₹4 trillion, with 75% of it originating from the private sector. The bank’s aggregate corporate advances as on 31 March stood at ₹11.4 trillion.
SBI has also been facing an upward movement in its domestic cost of deposits, a metric that feeds into the bank’s net interest margin (NIM), a key metric of profitability. The cost of deposits has been rising at least for the past four quarters, according to the bank’s presentation to analysts. In Q4, it stood at 4.81%, up from 4.75% in the December quarter.
Khara said the bank is mindful of its liability portfolio or deposits as it provides a stable stream of resources. “We continuously monitor the concentration in deposit profile daily, ensuring that dependence on wholesale funding is contained within the prescribed levels,” he said.
That said, Khara believes that deposit cost has now plateaued and there is unlikely to be any more impact on that front. The bank’s domestic
SBI posted a 3.1% rise in NIM—the difference between interest earned and expended—to ₹41,655 crore
NIM stood at 3.47% in Q4 FY24, up 13bps sequentially but down 37bps on a y-o-y basis. “We should be in a position to maintain NIMs at this level,” he said.
The bank posted a 3.1% rise in net interest income—the difference between interest earned and expended—to ₹41,655 crore.
Going ahead, the bank wants to look at some areas where it could further improve its performance. “On the liability side, we continue to focus on increasing our share in current accounts, while maintaining our leadership position in savings deposits. We aim to lower our cost-to-income ratio by focussing on the income side,” said Khara.
SBI saw a domestic deposit growth of 11.1% y-o-y to ₹47.2 trillion as on 31 March. Its growth in term deposits outpaced its growth on low-cost current and savings account..