SBI Q3 profit drops on Rs 7,100 crore provision for wage revision, pension cost

State Bank of India (SBI), the country’s largest lender, showed 35 per cent decline in net profit for the October-December quarter, citing higher operating expenses and one-off provisions, according to a stock exchange filing on Saturday.

The net profit for the fiscal third quarter stood at Rs 9,164 crore, down from Rs 14,205 crore during the same period last year. Analysts had projected a profit of Rs 12,987 crore for the quarter, based on LSEG data.

SBI noted that the profit was impacted by a Rs 7,100 crore-rupee provision allocated for wage revisions and pension costs. The provision contributed to the decline in net interest margins (NIMs), which came in at 3.34 per cent, down 9 basis points sequentially.

Motilal Oswal's estimates had anticipated a 17 per cent higher profit after tax for SBI in the December quarter, further emphasising the impact of the one-off pension provisions on the earnings.

Despite the one-off impacts, SBI's core performance remained on track, with slippages increasing marginally to Rs 5,050 crore. Healthy recoveries and write-offs led to a 13 basis points decline in the gross non-performing asset (GNPA) ratio.

The bank addressed the concerns, stating that the one-off provisions, particularly for pensions, majorly affected earnings for the quarter. SBI anticipates lower wage provisions in the fourth quarter, which is expected to contribute to an improvement in operating profitability in FY25.

Despite the challenges, the bank expressed confidence in its ability to keep margins stable, utilising various levers such as the CD ratio and MCLR repricing. Business growth remained robust, showing signs of recovery in the corporate segment, brokerage firm Motilal Oswal said.

The asset quality of the bank remained healthy, with the GNPA ratio improving further, and the restructured book being well-managed at 0.5 per cent of advances. The SMA (Special Mention Accounts) pool stands at 12 basis points of loans.

Analysts expect SBI to rebound in the coming fiscal year, with estimated Return on Assets (RoA) and Return on Equity (RoE) of 1.1 per cent and 19.6 per cent, respectively, in FY25.

Despite the one-off impacts, analysts at Motilal Oswal maintain a positive outlook, with a buy rating for target Price of Rs 800.