• UGI USER
  • Aug 06, 2024
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SBI BALANCES GROWTH WITH CONSERVATIVE DEPOSIT STRATEGY

Why in the news?

SBI’s strategic decision to maintain moderate deposit growth and a lower loan-deposit ratio highlights its conservative approach, balancing financial stability with steady growth amid industry competition.

source:slideshare

About SBI’s Strategic Decisions:

  • Moderate Deposit Growth: SBI’s deposit growth at 8% YoY, lower than peers ICICI, Axis, and Kotak Mahindra Banks (13-21%).
  • Loan-Deposit Ratio (LDR): Maintains a lower LDR of 76% compared to peers (87-92%), avoiding aggressive lending risks.
  • Excess Statutory Liquidity Ratio (SLR): Holds excess SLR in government securities worth ₹3.7 trillion, providing funding flexibility.

Financial Performance:

  • Net Interest Margin (NIM): NIM decreased by 12 basis points YoY to 3.35%, but net interest income rose by 7% to ₹41,135 crore.
  • Operating Profit: Core pre-provisioning operating profit grew by 11.8% despite a 7.5% fall in other income.
  • Credit Cost and Provisions: Credit cost increased to 0.48%, with additional non-NPA provisions of ₹31,000 crore to mitigate future NPA risks.

Future Outlook:

  • NIM and Growth Targets: Aims to maintain NIM between 3.2-3.4% and achieve 15% advance growth.
  • MCLR-based Loans: MCLR-based loans constitute 36% of total loans, with recent rate hikes to mitigate deposit rate increases.
  • Credit Loss Provisioning: Prepared for expected credit loss provisioning norms in FY26, with a smooth transition anticipated.
About State Bank of India (SBI):

  • State Bank of India (SBI): Indian multinational public sector bank headquartered in Mumbai.
  • Global Ranking: 43rd largest bank worldwide, 221st in Fortune Global 500 (2020).
  • Market Share: 23% in assets, 25% in loans and deposits.
  • Employees: Fifth largest employer in India with ~250,000 staff.
  • Historical Roots: Originates from Bank of Calcutta (1806), became SBI in 1955.

About Net Interest Margin (NIM):

  • Net Interest Margin (NIM): Measures bank profitability from core lending and investment.
  • Net Interest Income (NII): Difference between interest income and expenses.
  • Average Earning Assets: Average value of interest-earning assets.
  • Calculation: NIM = (NII / Average Earning Assets) × 100%.