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SBI Sees Margin Squeeze, But There's Solace in Asset Quality
Mint Mumbai
|February 08, 2025
India's largest lender, State Bank of India (SBI), continues to grapple with narrowing margins as the rising cost of deposits takes a toll.
Investors who hoped for stabilization in SBI's net interest margin (NIM) in the December quarter (Q3FY25) have been disappointed. The bank's NIM fell 21 basis points (bps) year-on-year (y-o-y) and 13 bps quarter-on-quarter (q-o-q) to 3.01% on a standalone basis. It essentially reflects the pressure on deposit costs.
Term deposits were up 13.5% y-o-y to ₹30.5 trillion, but CASA was up by only 4.5% as customers shifted saving account balances to fixed deposits to take advantage of higher interest rates.
The bank's endeavor is to maintain net interest margin at 3% on a sustainable basis.
The management expects a 25 bps cut in repo rate to cause a fall of just 3 bps in their NIM as repo rate linked loans stand at 28% of SBI's loan portfolio.
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