State Bank of India earnings beat as domestic NIMs reach 3 per cent

Investment View and 1QFY27 Performance

In its August 8, 2026 1QFY27 results update, Motilal Oswal Financial Services Limited reiterated its Buy rating on State Bank of India. The broker viewed the quarter as steady, supported by healthy net interest income, recovery in margins after the sharp 4QFY26 decline, robust treasury gains and controlled operating expenditure.

State Bank of India reported standalone PAT of Rs 21,120 crore in 1QFY27, up 10.2 per cent year on year and 7.3 per cent quarter on quarter. This was 15 per cent above Motilal Oswal Financial Services Limited's estimate.

Margins, Other Income and Operating Performance

Net interest income rose 14.4 per cent year on year and 6 per cent quarter on quarter to Rs 46,990 crore, in line with the broker's estimate. Global net interest margin expanded 5 basis points sequentially to 2.86 per cent, while domestic NIM expanded 7 basis points to 3 per cent.

Other income declined 8 per cent both year on year and quarter on quarter to Rs 15,920 crore, but was 11 per cent above the broker's estimate. This was supported by treasury income of Rs 4,320 crore, compared with a Rs 1,470 crore loss in 4QFY26. Operating expenditure of Rs 29,390 crore was 6 per cent below the broker's estimate, resulting in pre-provision operating profit of Rs 33,530 crore, which was 13 per cent ahead of estimates.

Loan Growth and Deposit Trends

Loans grew 19 per cent year on year and 2.3 per cent quarter on quarter. Retail advances grew 15.1 per cent year on year, agriculture advances grew 25.4 per cent and SME advances grew 22.3 per cent, while the corporate book was broadly flat sequentially.

Gold loans grew 97.5 per cent year on year and 18.6 per cent quarter on quarter, reaching 2.5 per cent of the overall loan book versus 1.5 per cent in 1QFY26. Deposits grew 9.7 per cent year on year but only 0.5 per cent sequentially. CASA fell 22 basis points sequentially to 39.2 per cent, while the global credit-deposit ratio rose to 83.1 per cent from 81.6 per cent. The domestic credit-deposit ratio of about 74 per cent was viewed as providing headroom for growth.

Asset Quality and Credit Costs

Asset quality remained resilient, although fresh slippages rose seasonally to Rs 7,360 crore from Rs 5,550 crore in 4QFY26. Gross and net NPA ratios improved sequentially by 2 basis points and 1 basis point to 1.47 per cent and 0.38 per cent, respectively. The provision coverage ratio was broadly stable at 74.2 per cent.

Provisions of Rs 5,050 crore were 5 per cent above the broker's estimate. Management indicated that Rs 1,450 crore of slippages had already been recovered.

Investors should monitor higher Stage 1 and Stage 2 floor rates, expected credit loss guidance in 2QFY27 and the bank's collection build-out for self-employed Xpress Credit borrowers.

Management Outlook and Strategic Positives

Management reiterated FY27 credit-growth guidance of 14–15 per cent, based on nominal GDP growth expectations of 12–12.5 per cent, and expects domestic NIM to remain above 3 per cent.

• Foreign offices had mobilised USD 6 billion of FCNR(B) deposits, with a further USD 10 billion targeted. Management does not expect these deposits to materially affect domestic or overseas NIM.
• Fee income was identified as a positive, with potential to reach 20 per cent of overall fees from about 15 per cent.
• SBI General remains a listing candidate.

Earnings Estimates and Valuation

Motilal Oswal Financial Services Limited raised FY27E and FY28E PAT estimates by about 3 per cent to Rs 85,180 crore and Rs 95,520 crore, respectively. The broker forecasts FY27E return on assets of 1.05 per cent and return on equity of 15.9 per cent.

The revised target price of Rs 1,370 is based on 1.5 times FY28E adjusted book value for the bank plus Rs 352 per share for subsidiaries.

In its sum-of-the-parts valuation, the broker applies a 20 per cent holding-company discount to subsidiary value.