SBI Q3 Results Review - Margin Expansion Aids Core Profitability: Systematix

Systematix Research Report

In Q3 FY23, State Bank of India posted stable core performance with core pre-provision operating profit (adjusted for other interest income, treasury gains, and two loans recoveries), as a percentage to average assets at 135 basis points, as against 133 bps in Sep-22 quarter.

Should we exclude the adverse impact of the provision for employees’ wage revision (of Rs 9.96 billion), the ratio improves by 10 bps to 143 bps. The improvement in core operating performance was mainly due to expansion in the domestic margin (reported net interest margin) by 14 bps QoQ to 369 bps.

Core fee income performance was relatively lackluster. Asset quality performance was stable with a gross delinquency rate at 44 bps (as against 35 bps in Sep-22) and the net delinquency ratio was at 21 bps (as compared to (-)40 bps in Sep-22).

SBI’s credit cost provision was at 22 bps, provision cover (excluding two) remained stable at 76% (from 78% in Sep-22); provision coverage ratio (including two) was at ~92%. The drop in accumulated provision to Rs 749 bn (from Rs 832 billion in Sep-22) was mainly due to the high loan write-off of Rs 100 billion.

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