By Nishit Navin and Siddhi Nayak
BENGALURU/MUMBAI (Reuters) -State Bank of India on Thursday said it expects to maintain its net interest margin (NIM) at around 3%, after reporting a drop in domestic margins but beating third-quarter profit estimates.
Indian lenders have been scrambling to raise deposits to meet rising demand for credit. Increased competition for deposits has pushed banks to either raise interest rates on deposits or slow loan growth, which has hurt margins.
SBI’s domestic NIM, the percentage difference between the interest income earned and the interest paid, fell to 3.15% from 3.27% in the previous quarter and 3.34% a year earlier.
“SBI’s margins are under pressure due to higher cost of deposit. While term deposits have seen strong growth, Current Account and Savings Account (CASA) deposits have grown at a slower pace,” said Vishal Narnolia, assistant vice president, research, at ICICI Securities.
Its shares closed down 1.58% following the results.
SBI’s term deposits, which offer higher interest rates, grew 13.5%, while CASA deposits, which have lower rates, grew 4.5% for the quarter ended December 31.
Domestic deposit growth was at 9.76%, while domestic loans grew 14.06%.
Its corporate loans increased by 14.86%, while retail personal loans were up 11.65%.
The lender said its corporate loan book pipeline stands at around 4.83 trillion rupees, adding that it expects to grow its unsecured loans in double-digit percentages in coming quarters.
SBI Chairman Challa Sreenivasulu Setty said the lender’s cost of deposits was stabilising as deposit rates have peaked.
SBI expects to maintain deposit growth at 10%, and loan growth at around 14%-16% for the current fiscal year.
The bank reported a net profit of 168.91 billion rupees ($1.93 billion) in the third quarter, ahead of analysts’ estimates of 164.72 billion rupees, according to data compiled by LSEG.
The bank’s net interest income, or the difference between interest earned on loans and paid on deposits, increased 4% to 414.46 billion rupees.
Its gross non-performing assets ratio improved to 2.07% from 2.13% in the prior quarter.
Slippages, or the proportion of good loans turning bad, dropped to 38.23 billion rupees from 49.60 billion rupees last year.
($1 = 87.5725 Indian rupees)
(Reporting by Nishit Navin and Siddhi Nayak; Editing by Varun H K)
