SBI Q1 Results Review - Higher Credit Cost Dulls An Otherwise Inline Earnings: Systematix

Systematix Research Report

Stata Bank of India's reported Q1 FY25 profit after tax of Rs 170 billion (-18% QoQ, +1% YoY) which was largely in-line with estimates as the impact of lower margins and lower other income was offset by lower-than-expected opex.

While credit costs inched up due to higher slippages in agri and unsecured credit, the bank expects full year credit costs to be around current levels.

The key result highlights were:

1. Loan growth (+1.2% QoQ, +15% YoY) was above sector average (+14% YoY). Sequentially, growth was led by RAM credit (+1.4% QoQ, +15% YoY) while corporate growth was flat QoQ, +16% YoY.

2. Deposit growth (flat QoQ, 8% YoY) was lower than sector deposit growth of 10.7% yoy. Current account and savings account ratio declined to 40.7% (-41bp QoQ).

3. Domestic credit-deposit ratio increased to 69.3% (+95 bps QoQ),

4. Excluding IT refund benefit of Rs 13 billion (+9 bps of IEA) in previous quarter, reported domestic net interest margin declined to 3.35% (-3bps QoQ) as higher cost of deposits (+19bps QoQ) was offset by higher investment yields (+20bps QoQ) and higher leverage.

5. Other income declined by -36% QoQ, -7% YoY due to higher seasonality.

6. CIR declined to 49.4% (-188bp QoQ) as wage hike related provisions are behind.

7. Credit costs increased to 0.48% (+19bp QoQ, +16bps YoY) due to higher seasonal slippages in agri, higher slippages in unsecured loans due to delayed salary credit in some states and higher ageing provisions.

8. Xpress credit GNPA increased to 0.97% (+20bps QoQ) while Agri GNPA increased to 9.84% (+26bps QoQ). On the other hand, corporate GNPA declined to 2.17% (-28bps QoQ).

9. The bank delivered RoA of 1.1%, RoE of 20.98%.

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