State Bank of IndiaQ2 FY24
State Bank of India Q2 FY24 Earnings Call Analysis
Revenue, margin, capex, fundraise and order book outlook from management commentary.
Price: ₹1,045P/E: 11.0Market Cap: ₹8.9L CrSector: Banks
Management growth scorecard
Revenue
Category 3
Margin
Category 3
Fundraise
Yes
Order
Yes
Capex
Yes
3 of 5 growth signals are positive.
Full analysisRevenue guidance
Category 3- →Credit growth target for the bank is around 15% going forward, with broad-based growth across all segments including Retail, Agri, MSME, and Corporate sectors.
- →Domestic advances grew 15.55% YoY in Q1FY25; Retail, Agri, and MSME advances crossed ₹21 trillion.
- →Retail Personal advances growing at 13.60%, Agri at 17.06%, and SME at 19.87%.
- →Corporate segment showing healthy growth close to 16% YoY.
- →CD (Credit-Deposit) ratio expected to be around 70-72% in the near future.
- →Loan growth is backed by robust demand in mortgage, car loans, personal loans, and pension loans sectors.
- →Investment proposals pipeline is significant at about ₹4.62 trillion, with 66% from private sector indicating positive economic outlook.
- →Treasury trading gains from fixed income and equity side expected to remain robust.
- →Deposit growth is targeted at around 8%, with maintained focus on cost-effective deposit-raising strategies to sustain margins.
Margin guidance
Category 3- →SBI expects credit growth of around 15% going forward, with broad-based growth across all segments, supporting income growth. (Page 31)
- →Operating profit increased by 4.55% YoY in Q1FY25, indicating improving operational efficiency with a focus on asset quality and technology. (Page 4)
- →Net profit increased modestly by 0.90% YoY in Q1FY25, with sustained RoA above 1% and RoE around 21%, reflecting durable profitability. (Page 4)
- →Cost-to-income ratio improved by 95 basis points YoY, indicating better cost management likely to support profit growth. (Page 4)
- →The bank aims to maintain NIM at current levels with variations within ±10 bps, supporting stable net interest income. (Page 31)
- →Credit cost is expected to stabilize around 0.50%, which should prevent significant pressure on profitability. (Page 32)
- →With a strong deposit franchise and focus on quality loan growth, the bank expects sustainable earnings growth supported by credit expansion and operational leverage. (Pages 31-32)
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Fundraise plans
Yes- →Board has approved raising ₹10,000 crores through Tier-1 capital and ₹15,000 crores through Tier-2 capital (Page 12).
- →No immediate plans mentioned for equity fundraising beyond these approved Tier-1 and Tier-2 issuances (Page 12).
- →Chairman highlighted ploughing back ₹1.14 trillion over the last 3 years internally to support growth, indicating preference for internal accruals over external equity dilution (Page 14).
- →Bank is also tapping multiple channels for funding growth, including infrastructure bonds worth about ₹60,000 crores and a ₹50,000 crore CD program (Page 20).
- →No specific mention of additional future fundraising through equity; focus remains on capital adequacy and maintaining sufficient capital to grow the book up to ₹6.5 to 7 trillion (Page 12).
Order book
Yes- →The current order book, including sanctions and proposals pending disbursement, stands at approximately ₹4.62 trillion.
- →About 66% of this order book is expected from the private sector.
- →There has been a significant increase in private sector commitments, which have moved from around ₹10 trillion to about ₹37 trillion.
- →This growth in private sector proposals reflects a positive perception of the Indian economy and expected acceleration in capex.
- →The bank sees ample opportunity in the pipeline, with strong demand across corporate and SME sectors.
Capex plans
Yes- →The bank has approved ₹25,000 crores for Tier-1 and Tier-2 capital raising.
- →Board has approved raising ₹10,000 crores worth of Tier-1 and ₹15,000 crores of Tier-2 capital.
- →SBI is tapping multiple channels for supporting growth, including infrastructure bonds (~₹60,000 crores) – the highest in the industry.
- →Infrastructure loan book is around ₹3 trillion, indicating significant investment in infrastructure sectors.
- →The bank has opened a Certificate of Deposit (CD) program of about ₹50,000 crores to raise resources.
- →With the current capital and liquidity, SBI can grow its book by about ₹6.5 to 7 trillion.
- →No immediate plans for listing subsidiaries or merging RRBs; strategic decisions on subsidiaries are still premature.
- →Regarding YES Bank stake sale, it is premature to comment though developments are being closely watched.
How does State Bank of India rank vs peers in Banks?
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