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• Shares of State Bank of India fell around 4% after the bank reported weaker-than-expected March quarter earnings and lower lending margins.
• SBI’s net interest margin declined to 2.8% from 2.98% in the previous quarter, raising concerns over rising funding costs and profitability pressure.
• Brokerages including JPMorgan Chase and Bernstein flagged weaker core earnings and cautioned about slower earnings momentum ahead.
• Analysts said stable asset quality and healthy loan growth remained positives, but may not fully offset pressure on net interest income.
• Despite near-term concerns, brokerages maintained a positive long-term outlook on SBI due to its strong balance sheet, scale and leadership in the banking sector.
State-run lender State Bank of India saw its shares fall around 4% during trading on Monday after brokerages turned cautious on the bank’s earnings outlook following its March quarter performance released late last week. Advertisement
The stock slipped to INR 977.7 during the session, marking its lowest level in nearly six weeks. The decline also made SBI the biggest drag on the Nifty PSU Bank index, which was down around 1.8% during trading hours.
Brokerages and analysts highlighted that the bank’s quarterly results reflected increasing pressure on core earnings and lending margins, signalling a more challenging profitability phase for the banking sector. Analysts noted that rising funding costs are beginning to impact margins faster than expected, even as loan growth remains healthy.
SBI reported a net interest margin (NIM) of 2.8% for the quarter, lower than 2.98% reported in the previous quarter. The lender also missed analysts’ profit estimates for the period, adding to concerns over earnings momentum.
Analysts at JPMorgan Chase stated that margin compression is becoming more visible as funding costs are repricing at a faster pace. The brokerage added that earnings momentum for banks like SBI could moderate in the coming quarters if margin pressures continue.
Meanwhile, analysts at Bernstein observed that the bank’s quarterly profit was supported by recoveries and treasury gains, which partly masked weaker underlying profitability trends. The brokerage further stated indirectly that core earnings remained below expectations and incremental margins had tightened, limiting the possibility of strong upside unless margins stabilise.
Despite the weak quarter, analysts continued to highlight SBI’s asset quality as a major strength. Gross bad loans and credit costs remained under control, helping the lender maintain overall balance sheet stability. However, brokerages said these positives may no longer fully offset pressure on net interest income as margins continue to narrow.
Analysts also pointed to SBI’s steady loan growth, but added that growth alone may not be sufficient to counter the impact of shrinking margins and rising deposit costs.
Over the past few quarters, several Indian banks have reported pressure on margins due to intense competition for deposits and higher funding costs. Large lenders, including SBI, have also been adjusting deposit rates to retain customers, which has affected profitability across the sector.
Even with near-term concerns, most brokerages retained a constructive long-term outlook on SBI, citing its strong market position, large balance sheet, extensive branch network and leadership in the public sector banking space. However, Bernstein analysts noted that much of the optimism surrounding the bank may already be reflected in the stock price, making shares more vulnerable to earnings disappointments going forward.
The latest fall also wiped out SBI’s gains for the current year. Despite the decline, the stock has still performed relatively better than the broader PSU banking index and benchmark markets over the longer period. The Nifty PSU Bank index has declined nearly 4% so far this year, while the benchmark Nifty 50 index has fallen around 8.7%.
Source Reuters
5th Jun, 2025
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