Detailed Narrative
State Bank of India presented a robust performance for Q2 FY26, underscoring its durable structural advantages and disciplined growth strategy. The bank's domestic Net Interest Margins (NIMs) saw a healthy improvement, rising by 7 basis points quarter-on-quarter to 3.09%, driven by effective repricing of deposits and liability management. This performance is set against a backdrop of a modest global economic recovery, with the IMF projecting world GDP growth at 3.2% for 2025 and 3.1% for 2026, while India's real GDP growth is anticipated to be around 6.8% for FY26 and 6.6% for FY27.
The quarter was marked by significant capital strengthening, with SBI successfully raising ₹25,000 crores of equity capital through a Qualified Institutional Placement (QIP). This QIP was notably oversubscribed 4.5 times, demonstrating strong investor confidence. The bank also reported industry-leading credit growth, with a good 7.1% credit growth post-March 2025, and management expressed confidence in achieving at least 10% corporate credit growth in the next two quarters. The overall credit growth target for scheduled commercial banks is projected to be in the range of 11-12% for FY26, with SBI's own overall credit growth guidance revised upwards to 12-14% from the previous 11-13%.
Operationally, SBI demonstrated strong recovery efforts, with AUCA recovery reaching ₹2,400 crores, surpassing the Chairman's guidance of ₹2,000 crores per quarter. However, the recovery rate from written-off accounts is now expected to be around 8%, a slight downward revision from the previous 10%, attributed to declining security values. The bank's fee income growth was described as "phenomenal," exceeding 20% this quarter, primarily driven by increased debit card spends and interchange fees. The Liquidity Coverage Ratio (LCR) stood strong at 143.8%, an increase from 139% in June.
Strategic initiatives are well underway, with Project SARAL, aimed at simplifying operational processes and enhancing digital capabilities, expected to yield its first benefits by Q1 FY26 (April 2026). The bank also launched Tab Banking in Q1 FY26, initially for Corporate Salary Package customers, streamlining the onboarding process to just 5-7 minutes. Management reiterated its commitment to leveraging its extensive CASA franchise, with a current CASA ratio of 39.63%, and aims to increase its Products Per Customer (PPC) from 3.5 to 5. The bank is also seriously considering the listing of its subsidiaries, SBI AMC and SBI General, to unlock value.
During the Q&A, management addressed concerns regarding treasury profits, which were down almost 50% from ₹8,082 crores to ₹4,011 crores, attributing it to the absence of OMO and switch operations available in the previous quarter. They expressed confidence in repeating Q2's treasury performance in Q3. Discussions on Expected Credit Loss (ECL) guidelines indicated a limited immediate impact due to a four-year roadmap for implementation. The bank's Return on Assets (ROA), excluding the exceptional profit from the Yes Bank stake sale (net ₹3,386 crores), was noted to be around 1.04%, reinforcing underlying profitability. The outlook for the 10-year G-Sec yield is seen as range-bound between 6.2-6.65%.