In Bengaluru/Mumbai, on February 6, State Bank of India announced its aim to maintain a net interest margin (NIM) around 3% despite a decrease in domestic margins, surpassing third-quarter profit expectations.
Indian banks are striving to raise deposits to meet growing credit demands, resulting in heightened competition for deposits, prompting banks to either increase deposit interest rates or slow loan growth, impacting margins.
SBI's domestic NIM, the difference between interest income earned and paid, declined to 3.15% from 3.27% the previous quarter and 3.34% a year earlier.
Vishal Narnolia, assistant vice president of research at ICICI Securities, noted, SBI's margins are under pressure due to higher deposit costs, with term deposits growing significantly compared to Current Account and Savings Account (CASA) deposits.
Term deposits at SBI, offering higher rates, rose by 13.5%, while CASA deposits with lower rates increased by 4.5% for the quarter ending December 31st.
Domestic deposits grew by 9.76%, while domestic loans increased by 14.06%.
Corporate loans at SBI surged by 14.86%, and retail personal loans saw an 11.65% increase.
SBI anticipates a double-digit percentage growth in unsecured loans in the near future, with the corporate loan book pipeline standing at about 4.83 trillion rupees.
SBI Chairman Challa Sreenivasulu Setty stated that the bank's deposit rates have peaked, and the cost of deposits is stabilizing.
For the current fiscal year, SBI eyes maintaining deposit growth at 10% and loan growth between 14%-16%.
The bank announced a third-quarter net profit of 168.91 billion rupees ($1.93 billion), exceeding analysts' estimates of 164.72 billion rupees.
SBI's net interest income climbed by 4% to 414.46 billion rupees, while its gross non-performing assets ratio improved to 2.07% from 2.13% in the prior quarter.
Notably, slippages (good loans turning bad) decreased to 38.23 billion rupees from 49.60 billion rupees last year.
(1 USD = 87.5725 INR)