Latest news with #CSShetty
Mint
08-08-2025
- Business
- Mint
SBI expected to report tepid Q1 earnings on net interest margin pressure
Mumbai: State Bank of India, the country's largest lender, is expected to report muted earnings in the first quarter of FY26 as continued pressure on net interest margins (NIM) weighs on overall sector performance amid lower margin compression and potential treasury gains. The bank is scheduled to declare results on Friday. SBI's net profit in the June quarter was pegged at ₹16,975 crore, according to Bloomberg consensus estimates of 24 analysts. The lender earned ₹17,035 crore in Q1 of FY25. 'We expect operating profit to decline around 8% YoY (year-on-year) as we build NIM compression in the first quarter of FY26," Kotak Institutional Equities said in a report on 6 July. 'We are building flat NII (net interest income) decline despite 11% YoY loan growth due to higher cost of funds and pass-through of recent rate cuts. Lower staff costs and higher contribution from treasury income are supporting operating income." According to Motilal Oswal, public sector banks including SBI are likely to report modest year-on-year profit growth in the June quarter, driven by lower margins and a rise in provisions. Like its peers, SBI's NII is expected to remain little changed, while treasury gains could perform better due to the sharp drop in the G-Sec yield during the quarter. The bank's asset quality is expected to be stable, supported by contained slippages and a healthy provision coverage ratio. In Q4 of FY25, SBI's gross non-performing asset ratio — aggregate bad loans as a percentage of total advances — stood at 1.82%, 42 basis points lower than a year earlier. Loan growth Analysts expect tepid loan growth at the state-owned lender. Sequential loan growth is estimated at below 2.5%, according to a Yes Securities report on 4 July. Compared to private peers, public sector banks including SBI may fare better on earnings, supported by relatively stable margins and lower provisions, following the additional buffers built in Q4 FY25, Yes Securities said. Loan growth at public sector Punjab National Bank and Bank of Baroda stood at 9.6% and 12.4% y-o-y, respectively, in the June quarter. Large private lenders HDFC Bank and ICICI Bank posted sluggish loan growth and narrowing margins in the June quarter, reflecting growing pressure on profitability, following the Reserve Bank of India's recent repo rate cuts. Both lenders recorded a decline in NIM in Q1 as borrowing rates adjusted faster than deposit rates after the rate cut. SBI will be able to maintain return on assets at 1%, chairman C S Shetty said on a call with analysts on 3 May. He said the outlook for NIM would depend on the pace and depth of future rate cuts. Shetty said that the adjustment in loans linked to the marginal cost of funds-based lending rate — an internal benchmark — would require a drop in the incremental cost of deposits. 'We will ensure that the readjustment of interest rates and the deposits are aligned at least broadly, with the reported cards, so that the margin protection is there," Shetty said.
Time of India
12-05-2025
- Business
- Time of India
PSU banks may take a hit on margins as interest rates dip
Kolkata | Mumbai: Public sector lenders have gained about 26% in FY25 net profit cumulatively, but the current fiscal may expose them to pressure on net interest margins (NIM), thus likely leading to a moderation in their return on assets. #Operation Sindoor The damage done at Pak bases as India strikes to avenge Pahalgam Why Pakistan pleaded to end hostilities Kashmir's Pahalgam sparks Karachi's nightmare Large banks such as State Bank of India , Canara Bank and Punjab National Bank have lowered their NIM expectations. Canara and PNB have also given guidance of lower credit growth amid geopolitical uncertainty triggered by US tariffs. "From a profitability perspective, return on assets (RoA) are to moderate 10-20 basis points (bps) to 1.1-1.2% this fiscal from an over-two-decade peak of about 1.3% in fiscals 2024 and 2025," Subhasri Narayanan, director, Crisil Ratings told ET. "This will stem from a similar contraction in their NIMs, due to a faster downward repricing of loan assets than of deposit liabilities in a falling interest rate environment," she said. For the entire banking sector, about 45% of total loans are linked to an external benchmark, primarily repo-these are typically repriced rapidly after rate cuts. For the public sector group, the EBLR-linked loans are around 35% of the total portfolio. SBI chairman CS Shetty expects another 50 basis points policy rate cut starting with 25 bps in the next monetary policy committee meeting scheduled on June 6. "There will be, definitely, some pressure on the margins going ahead," he said. The bank has not given any NIM guidance since some of the loan portfolio gets repriced immediately with the policy rate cut, while the impact of lower deposit rates comes at a lag. "The lag generally is 12-18 months for existing deposits to get repriced," Shetty said. SBI expects gross credit to grow by 12-13% in FY26, against 12% expansion in FY25. Canara Bank gave a guidance of 10-11% credit growth against 11.74% in FY25, while PNB pegged it at 11-12% as compared with the FY25 growth of 13.6%. "In this context, public sector banks-with about 35% of their total loans being linked to EBLR-are better positioned than private banks which have over 50% of their loans linked to external benchmarks. Ceteris paribus, transmission of the rate cuts on the asset side may be slower for PSBs resulting in a less than average fall in NIMs," Crisil's Narayanan said. She expects overall bank credit to grow 100-200 basis points (bps) faster on-year to 12-13% in fiscal 2026 given three tailwinds: the recent supportive regulatory measures, a boost to consumption from tax cuts and softer interest rates. "Our prognosis for large banks is that of benign margin expansion or, at the very least, stability in H2FY26 after a shallow bottom in H1FY26. Thus, we expect reasonable credit growth to translate into concurrent earnings growth momentum for banks in FY26-a key catalyst for re-ratings, in our view," said Santanu Chakrabarti, an analyst with BNP Paribas Securities India. "We believe the timing of rate cuts will be key to the margin pivot point and gradient". In FY25, all government-owned lenders reported a surge in net profit, offsetting the pressure on their NIMs. SBI posted a 15.8% rise in net profit. PNB showed a triple digit 102.6% jump while Bank of Baroda booked the least growth at 10.6%. Overall net profit for the public sector pack stood at ₹1.93 lakh crore in the last fiscal year, up 26.14% over ₹1.53 lakh crore in the preceding fiscal.
