State Bank of India chairman CS Setty is sticking to the new guidance that the country’s largest lender will clock deposit growth of 10% in the current fiscal while loan growth will be at 14% to 16% and net interest margin at around 3%.

The state-run lender had revised downwards the deposit growth to 10% after the September quarter results, from its original guidance of 11% to 12% for FY25. 

"We said that we would be happy if we reached deposit growth of 10%. I think we are almost there. For the first time, the bank’s deposit base has crossed Rs 52 lakh crore,” Setty told analysts after announcing the bank’s fiscal third-quarter performance.

On the CASA (current account savings account) side, the target is to bring the share back to 40% of total deposits, which has fallen to 39.20% as of 31 December 2024 compared to 41.18% a year ago and  40.03% in Q2FY25. This has led to a rise in cost of deposit resources, prompting the bank to widen its customer outreach in terms of opening savings bank accounts. In the last nine months, SBI has acquired 9.5 lakh salary customer accounts. 

Setty said the guidance in terms of credit growth of 14% to 16% stands good. The bank’s credit growth continues to be robust, with all the major segments registering double-digit growth. In the corporate loan segment, the bank is looking to achieve its internal growth target of 10% to 12% for FY25. 

According to Setty, the lending margin compression in Q3 was due an increase in cost of deposit resources and also treasury gains being absent in the December quarter, unlike in the previous three months ended September. “Our core focus on qualitative advances growth continues to be there. So, our guidance is that the NIM would be higher than 3% in FY25,” the SBI chairman said.

The bank is not compromising on the yield on advances. “In many cases, we are letting go of some of the loans where we feel that the pricing is not acceptable. The SMEs generally are more profitable than the corporate advances. Our growth rate in SMEs is likely to give some yield pick up on the average yield on advances,” Setty said. 

Despite margins being lower and deposit mobilisation staying weak, SBI reported an 84.3% jump in its net profit to Rs 16,891 crore in the fiscal third quarter ended December.

The lender made a one-time provision of Rs 7,100 crore towards wage revision and pension cost which resulted in its profit coming down from the preceding quarter. Sequentially, the bank reported a  7.8% lower  net profit of Rs 18,331 crore.

Net interest margin (NIM) in domestic business declined to 3.15% at the end of the December quarter, compared to  3.34% a year ago and 3.27% a quarter ago. 

The state-run lender’s NIM could further fall if the RBI-led monetary policy committee on Friday decides to start the interest rate cut cycle as the share of repo-linked loans is lower than peers at 28%. The bank, though, will have the option of repricing of deposits  and market borrowings.

“We will strive to maintain the NIM at higher than 3%,” said Setty.

On the deposit side, Setty said CASA ratio as high as 45% as seen during the covid-19 pandemic would be difficult to achieve now, and growth rate at that levels is also not possible.  There is a different investment culture now. Though the Union budget will lead to some increase in disposal income after savings on income tax for those in the Rs 12 lakh bracket, “our assumption is it will partly go on consumption, deposits and investments,” the SBI chief added.

Earlier, Financial Services Secretary M Nagaraju said the government expects income tax-related measures announced in the Budget to lead to additional bank deposits of Rs 40,000-45,000 crore.

For the December-ended quarter, SBI’s total deposits grew  at 9.81% year-on-year to Rs 52.29 lakh crore. This was driven by a year-on-year rise of 13.47%  in term deposits to Rs 30.49 lakh crore. CASA deposits grew 4.46% year-on-year and down 0.03% quarter-on-quarter to Rs 19.65 lakh crore.

The bank's cost of funds climbed to 0.24% in Q3FY25 from 0.21% in Q3FY24 due to weak CASA growth and higher bulk deposit rate.

On the credit side, Setty said corporate and retail loans will drive growth. 

The lender has a corporate loan pipeline of Rs 4.83 lakh crore, of which Rs 2.2 lakh crore in sanctioned loans across 800 proposals and Rs 2.61 lakh crore is under process..

"Based on the visibility we have on corporate loan pipeline as well as in terms of what we see in January in retail and home loans, we are confident that we will be sticking to the overall credit growth guidance of 14-16% for FY25,” Setty told reporters.

On private sector capital expenditure, Setty said it has begun to pick up but in core sectors such as steel it’s yet to see expansion. 

The bank reported a loan growth of 13.5% over the earlier year to Rs 40.68 lakh crore as of 31 December 2024, led by the RAM (retail, agriculture and MSME) segment.

Domestic retail personal advances jumped 11.65% to Rs 14.47 lakh crore.

The corporate loan book rose 14.86% year-on-year to Rs 11.76 lakh crore while domestic retail credit increased 11.65% to Rs 14.47 lakh crore. Within retail, home loans climbed 14.26% year-on-year to Rs 7.93 lakh crore.

“The bank  will see double-digit growth in unsecured personal loans,” Setty said. 

The lender has a micro finance portfolio of Rs10,000 crore to Rs11,000 crore. “This is very small, although they do see some stress in the industry,” Setty said.

For the quarter ended December 2024, SBI’s net interest income (NII)  was Rs 41,446 crore, 4.09% higher than the year-ago period but down 0.42% quarter-on-quarter.

The bank’s operating profit increased 15.8% to Rs 23,550.81 crore from Rs 20,336.08 crore a year ago.

The bank’s gross non-performing asset (NPA) ratio was 2.07 % at the end of December 2024, improving from 2.42 a year ago and 2.13% a quarter ago.  

Net NPA ratio was flat at 0.53% quarter-on-quarter but declined from 0.64% in the year-ago period. 

Slippage ratio for Q3FY25 improved to 0.59% as of 31 December 2024, down from 0.68% in the previous quarter and 0.67% in Q3FY24.

Provision coverage ratio (PCR) at 74.66% improved by 49 basis points on-year. 

Setty said the bank will continue to open around 600 branches every year, especially in areas where it doesn’t have a presence. These won’t be ‘hole in the wall’ sort of branches but where the surveys are done and the potential has been appraised. The bank already has a network of 22,800 branches.