State Bank of India Q1 FY2026 Concall Summary

Key Takeaways

• Profit up, credit growth muted: Net profit rose 12.48% YoY to ₹19,160 crores, but QoQ credit growth was just 0.80% as corporate prepayments and CP market substitution drained the loan book.
• NIM guidance held at 3%, but a U-shaped path: Management expects domestic NIM to dip in Q2 before recovering in H2, helped by deposit repricing, the savings rate cut, and the CRR release.
• Slippages jumped QoQ, no alarm sounded: Fresh slippages rose to ₹7,945 crores, but the Chairman points to a marginal YoY move and a significant pullback already seen in the last 30-45 days of the quarter.
• The deposit franchise is being protected: Cost of deposits ticked up on a 14% FD growth rate and CASA decline; further TD rate cuts are possible but will be mindful of the large saver and senior citizen base.
• What to watch next quarter: Whether the promised double-digit corporate credit growth materialises from the ₹7.2 lakh crore pipeline, the depth of the Q2 NIM dip, and the pace of Xpress credit’s comeback.

Credit Growth: The Q1 Soft Patch

• Corporate book drained by price discipline: Around ₹12,000 crores of prepayments hit because SBI refused to match pricing that did not fit its risk framework in a declining rate cycle. A further ₹16,000-18,000 crores moved to the CP market where rates became extremely competitive and SBI would not follow.
• Xpress credit stalled on multiple fronts: Growth was disappointing because SBI temporarily tightened underwriting on lower-NMI government employees where over-leverage was observed, the full digital reorientation took time to stabilise, and defence-area customers faced access issues during disturbances. The portfolio stayed flat at ₹3.5 lakh crores, partly because it is a rollover product with an effective 2-3 year tenure, so quarterly repayment volumes are high.
• The pipeline is the comeback story: Management is confident of returning to double-digit corporate credit growth from next quarter onwards, citing a ₹7.2 lakh crore project pipeline and SBI’s strength in project finance. Full-year corporate growth is hoped to reach 10-11%.
• RAM segment held up: Home loans grew 15% on a ₹8 lakh crore base, described as phenomenal. SME growth at 19-21% is robust and unlikely to accelerate further. Unsecured personal loans and auto loans are expected to pick up in H2, with auto currently weak on poor vehicle sales.
• Power sector book flat by design: Only 1% YoY growth because renewable projects have short execution cycles under 12 months, leading to faster churn via refinancing or moving into InvITs; SBI says it is actively involved, not staying away.

Setty: "We almost had around ₹12,000 crores prepayments because we did not want to go to that level of pricing considering the risk pricing in view."

Margins: The U-Shaped Bet

• Domestic NIM guidance held at 3%: The trajectory will be U-shaped, likely coming down in Q2 before improving from Q3 to Q4. Management declined to hazard a guess on the depth of the Q2 dip.
• Three levers for the H2 recovery: Deposits get repriced, predominantly the FD book over the next 8-12 months; the full benefit of the savings bank rate reduction flows through; and the CRR cut releases roughly ₹52,000 crores, which is not currently earning anything, adding a NIM contribution.
• Cost of deposits rose on mix shift: The uptick was driven by a significant movement towards fixed deposits, with FD growth at almost 14% on a very large base, plus a reduction in CASA both YoY and sequentially. Some FD rate cuts have already been done and the benefit will accrue in the quarters ahead.
• Deposit pricing is a franchise call: Management is not ruling out further term deposit rate cuts but will be mindful of the large saver and senior citizen base, stating it never wants to short-change depositors.
• Asset-side rates seen as stable: Policy rate stability is expected to stabilise retail asset-side rates, supporting the margin recovery.

Setty: "As I mentioned earlier, I think the NIM trajectory will be U-shaped. It probably will come down in Q2. While we are not hazarding a guess how much it will come down, but I think it will definitely improve from Q3 to Q4..."

Asset Quality: Slippages Rise, Pullback Underway

• Fresh slippages rose QoQ but flat YoY: Slippages totalled ₹7,942 crores, with SME, agriculture, and personal segments each contributing roughly one-third. The Chairman says comparison should be with Q1 of the previous year, where movement is marginal, and notes no concern on asset quality in any segment.
• Significant pullback already seen: In the last 30-45 days of Q1, ₹1,585 crores had already been pulled back, and the pullback continued as management spoke.
• SMA numbers moderated: No untoward development versus the Q1 comparison.
• Buffer provisions untouched: Not utilised at all in the quarter.
• Xpress credit GNPA ratio rose on base effect: The ratio moved to almost 1.2% from under 1% because the absolute NPA number has not moved much while the book remained flat; management sees no major concern and describes Xpress credit as "more secured than the secured."
• SME book seen as well-protected: Underwriting has improved tremendously with the Business Rule Engine using GST data, income tax data, own account statements, and historical default data. Most SME lending is either secured or backed by CGTMSE guarantee.
• Slippage ratio target: Contain below 0.6% for the full year.

Setty: "There is no concern on the asset quality in any of the segments; we have seen. And even among those slippages which we have witnessed in the Q1, as it happens every Q1, there has been a significant pull back as we speak in the last 30 or 45 days."

Operating Efficiency & Other Income

• Operating expenses fell sharply: Down 21.92% with overheads down 37.98%, driven by containment. Q4 had some front-loading of expenses, which is one reason for the lower growth.
• Cost-to-income target: Effort is to keep it below 50% through the cycle; no specific number is being given. Historically low YoY opex growth of 7.88% is difficult to replicate.
• Other income dropped on seasonality: The QoQ decline in miscellaneous income is attributed to Q4 seasonality: inspection charges, folio charges, and other miscellaneous incomes are recovered at year-end and not available in Q1.
• Treasury income saw a forex swing: Profit on sale of securities was more or less the same as Q4. The difference came from forex, where the combination of trading income and derivative MTM movement did not see the same positive movement as Q4, which is beyond the bank's control.
• Project SARAL launched: A bank-wide operations process re-engineering project to simplify, automate, centralise and outsource retail operational processes, aided by AI, aimed at improving productivity, resilience, customer service and employee enablement.

Deposits, Liquidity & Capital

• Current account growth a pleasant surprise: Sharp increase driven by both government and non-government accounts, supported by specialised hubs, dedicated workforce, and relationship managers; QoQ improvement in daily average CA balances noted.
• QIP completed: The largest QIP ever at ₹25,000 crores, with more than 60% of investors cross-border/foreign and some first-time investors looking at SBI stock. Proceeds to augment CET-1, not for growth capital.
• AFS reserves accreted: From ₹6,600 crores to ₹7,700 crores.
• Yes Bank stake: The binding offer for the first tranche is valid for a certain period that has not elapsed; for the next tranche, SBI is free to look at the opportunity with no limitations on pricing ability or exit timing.
• Subsidiary listing: A couple of candidates exist, but there is no sense of urgency on timing.

Guidance & Commitments

Key Metrics