Widely read:
State Bank of India (SBI) is set to announce its first-quarter results for FY2025-26 on August 8. Analysts expect a steady but subdued performance as the lender grapples with narrowing margins and elevated funding costs. While net profit may remain flat year-on-year, healthy loan growth and stable asset quality are expected to anchor the quarter’s performance.
Profit Likely to Stay Flat Amid Margin Squeeze
SBI’s Q1 net profit is estimated to hover around Rs 17,000 crore – marginally lower or flat compared to the Rs 17,000 crore reported in Q1 FY25. A Bloomberg poll places the standalone profit estimate at Rs 16,964 crore, reflecting a modest 0.4 per cent decline YoY.
The primary drag this quarter is expected to come from compression in net interest margins (NIM), with analysts projecting a dip to 2.85–2.9 per cent, down from 3.15 per cent in Q4 FY25. This reflects rising deposit costs outpacing the yield on loans, a trend banks across the sector are contending with. Net interest income (NII) is likely to remain flat at Rs 42,000–42,500 crore.
Seasonal Softness in Non-Interest Income
The April–June quarter typically sees lower fee-based income, and that trend is expected to persist this year. However, some support may come from treasury gains and disciplined operating expenses, helping SBI maintain a stable return on assets (~1 per cent) despite the margin pressure.
Growth Momentum Intact
One of the key positives is SBI’s continued growth in credit. Advances are expected to grow 11–13 per cent YoY in Q1 FY26, driven by both retail and corporate segments. Sequential growth, however, may be moderate at 0.5–1 per cent, given seasonal factors. Deposit growth is likely to trail slightly, growing in the range of 9–11 per cent YoY.
Notably, SBI has guided for 12–13 per cent credit growth for the full year, supported by robust capital adequacy (~14.3 per cent as of March 2025) and plans to raise Rs 25,000 crore in equity.
Asset Quality Likely to Remain Stable
Despite margin pressures, SBI’s asset quality remains a pillar of strength. The gross NPA is expected to decline marginally from 1.82 per cent in Q4 FY25, with recoveries and write-offs supporting the improvement. While some stress in the agri portfolio may result in a seasonal uptick in slippages, analysts do not see any alarming trends in retail or unsecured portfolios. Provisioning is expected to normalise this quarter, potentially lowering sequential credit costs.
What to Watch
With no major surprises expected, investor focus will shift to SBI management’s commentary on three key areas:
- Margin trajectory over the coming quarters
- Deposit mobilisation strategy and cost management
- Progress toward sustaining return on equity above 15 per cent
Clarity on these fronts could help investors look past the short-term earnings squeeze.
Stock View & Valuation
At around Rs 805, SBI trades at reasonable valuations. According to Value Research Stock Ratings, SBI holds a 4-star rating, with sub-scores of:
- Quality: 6/10
- Growth: 8/10
- Valuation: 7/10
- Momentum: 5/10
This indicates a fundamentally sound franchise with healthy growth potential and attractive valuation, albeit with limited short-term momentum. For long-term investors, the current levels may offer a compelling entry point, especially if the bank maintains its strong asset quality and executes its growth strategy effectively.
Curious how SBI compares to other banking stocks? Use our Stock Screener to filter banks by growth, valuation, and asset quality — and spot potential winners for the long run.
Disclaimer: This is not a stock recommendation. This story was created with the assistance of artificial intelligence and has been reviewed by human experts for accuracy and is intended for informational purposes only. Please take it with a grain of salt and conduct your own research or consult a financial advisor before making any investment decisions.
Disclaimer: This content is for information only and should not be considered investment advice or a recommendation.
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