SBI Q4 Results Review - Quarterly Earnings Outshine Other PSU Banking Peers: Systematix

Systematix Research Report

State Bank of India reported Q4 FY24 earnings of Rs 207 billion (+126% QoQ, +24% YoY) which beat our estimates due to higher-than-expected other income, lower opex and lower provisions. The quality of its earnings coupled with the strong guidance, for FY25, was in stark contrast to those of its peer PSU banks like Canara Bank and Punjab National Bank, which have seen superior share outperformance versus SBI during the last year.

The key result highlights were:

1. Gross advances growth of 5% QoQ and 15% YoY was higher than guidance of 12-14% growth in FY24 and was led by strong growth of 11% QoQ in corporate advances. The bank guided for 13-15% loan growth in FY25.

2. Considering the bank’s low domestic C-D ratio of 68%, deposits mobilization was modest at 3% QoQ, 11% YoY.

3. On calculated basis, Q4 FY24 net interest margin increased by +5 bps QoQ supported by Rs 13 billion (9 bps of IEA) benefit from IT refund while cost of funds increased by +4 bps QoQ.

4. Other income increased by 1.5 times QoQ due to higher TWO recovery, higher dividends from subsidiaries and seasonally higher fee income.

5. FY24 employee costs of Rs 712 billion were 7% lower than guidance of Rs 770 billion (ex of pension and dearness relief related one-offs) due to mark to market gains on pension and provident fund and reversal of excess gratuity provisions. Further, with catch-up provisions completed in FY24, the bank guided for FY25 wage bill to decline to Rs 650 bn-700 bn.

6. GNPA / NNPA declined to 2.2% / 0.6% (-18 bp / -7bp QoQ) as gross and net slippage ratios declined to 0.46% / 0.22% versus 0.61% / 0.39% QoQ.

7. FY24 return on asset was 1.04%, in-line with guidance and RoE was 20.32%.

8. CET-1 increased to 10.36% (ex FY24 profits) versus 9.09% in Q3 (ex 9M profits). The bank states it is open to raising capital, if required.

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