Captains Speak     

Published: November 30, 2024
Updated: November 30, 2024

State Bank of India

Deposits have cross Rs 50-lakh cr mark Out to woo wealthy clients

State Bank of India, the country’s largest commercial bank, is investing in wealth management technology in order to boost its share of India’s affluent customers, according to Challa Shreenivasulu Setty, SBI Chairman.

Revealing this at a conference call organized to discuss the performance of the bank during Q2 FY25, Mr Setty added, “That is pitting the bank against global banks such as HSBC Holdings Plc, Barelay’s Plc and Standard Chartered Plc, in trying to grab a share of India’s rising wealth. Just a year ago, in 2023, India generated about $ 590 billion in new wealth – its largest increase in history.”

Analysing the performance of the bank during Q2FY25, Mr Setty opined that the results highlight continuity, consistency and significant long-term strengths. The bank has remained focused on strengthening the key components that contribute to sustainable value. It has prioritized liability franchise. The refined processes continue to improve underwriting standards. The bank expects scheduled commercial banks’ deposits to grow 11-12% and credit by 12-13% in FY25. The credit growth of the bank was 14.93% yoy, while deposit growth was 9.13% at end-September 2024. The domestic CD ratio was at around 67.9% at end-September 2024. Net profit increased 28% yoy to Rs 18,331 crore in Q2FY25.

According to Mr Setty, the bank has been seriously pursuing deposit growth, which has crossed a milestone of Rs 50 lakh crore to touch Rs 51 .17 lakh crore at end-September 2024. The bank has more than 50 crore customers, thus serving one out of every three Indians. It has maintained the Casa ratio at more than 40%. Credit growth continues to be robust across all segments. Domestic advances have grown by 15.55% yoy, driven by 18.35% growth in corporate, 17% in agriculture, 17% in MSME and 12% in retail segments. Foreign offices advances have grown by 11.56% yoy.

N.P.A. BETTER

Referring to the asset quality, he said the slippage ratio was 0.51% with the retail slippage ratio at 0.31% in Q2FY25. Credit cost was 0.38% and PCR was at an all-time high of 75.6%. The net NPA ratio improved 11 bps yoy and stood at 0.53% at end-September 2024. The liquidity coverage ratio was healthy at 129% at end-September 2024. The domestic CD ratio was at 67.87%, indicating a significant potential to grow the credit portfolio.

According to Mr Setty, the bank remains well-capitalized and has sufficient headroom to take care of business growth requirements. The capital adequacy ratio is at 13.76%, and considering profits for H1FY25 it would be at 14.79%. RoE is higher than credit growth, indicating an addition to the CET I ratio. More than 8 crore customers have been registered on YONO, driving the digital agenda of the bank. About 61% of regular savings bank accounts were opened through YONO in Q2FY25.

As regards subsidiaries, he pointed out that they are consistently performing well and continue to create significant value. SBI will nurture these subsidiaries and maintain leadership positions in the respective businesses. On the liability side, SBI continues to focus on increasing share in current accounts while maintaining a leadership position in saving bank deposits by further strengthening customer outreach and the branch network. The bank aims to continue to hold on to its deposit marketshare of 22- 23%. As per the bank, incremental credit growth would be taken care of by incremental deposits. The bank has maintained credit growth guidance of 14-16%. It aims to accelerate deposit growth above 10% and feels 10-10.5% growth is possible.

LOAN GROWTH

According to Mr Setty, express credit growth moderated on account of demand conditions and higher repayments, while the bank is observing demand coming back in unsecured segments. The tenure of express credit is low at 14 months. SBI can accelerate express credit growth to double digits. Its corporate loan book growth is expected to remain in strong double digits driven by a strong sanctions pipeline and an increase in working capital utilization. Agriculture loan growth is strong for the bank, despite heavy rains and flooding. It is taking various steps to improve SME financing with database and analytics, leading to a fast sanctioning turnaround. Home loans growth is expected to remain strong in the range of 13-14%.

Referring to recoveries in written-down accounts, Mr Setty revealed that these recoveries have improved to Rs 2,336 crore in Q2FY25, while the bank expects to continue the current run rate of recoveries in written-off accounts going forward with good visibility. SBI wants to improve its loan processing charges and the renewed focus on non-interest income will continue. Provisions were lower in Q2 last year on account of NPA automation, leading to reversals of provisions of Rs 1,010 crore. The bank does not have concern on its retail personal loan book growth as well as asset quality.

Other points made by Mr Setty:

• The bank has continued to report RoA and RoE of greater than 1% and 20% at the end of H1FY25.
• The return on RWA was healthy at 2.07%.
• The bank expects bond yields to remain in the range of 6.6%-6.9%, which still gives room for trading and MTM gains.
• Forex income jumped in Q2FY25 due to volatility and the proprietary derivatives book contributing to the gains.