State Bank of India
NSE:SBIN
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State Bank of India
Earnings Call Analysis
Q4-2024 Analysis
State Bank of India
In financial year '24, the bank reported its highest-ever net profit of INR 61,077 crores, a notable increase of 21.59%. This success came despite wage revision expenses amounting to INR 13,387 crores and a one-time cost of INR 7,100 crores linked to pension liabilities. For the fourth quarter alone, net profits soared by 125% sequentially to INR 20,698 crores. This demonstrates the bank's robust financial health and its ability to absorb significant liabilities without impacting long-term profitability.
Non-interest income saw impressive growth of over 41% compared to the previous year. This was driven by the bank's extensive customer base, which includes INR 50 crores plus customers accounting for nearly 35% of India's population. This customer-centric approach, combined with strong underwriting processes and effective risk pricing, has solidified the bank's position in the market.
The bank's deposits grew by 11% year-over-year, with term deposits increasing by more than 16%. Its liquidity coverage stood strong at 124%, well above the regulatory benchmark. Credit growth was robust across all segments. Retail, agricultural, and SME advances exceeded INR 20 trillion, growing at rates of 14.68%, 17.92%, and 20%, respectively. The corporate segment also showed healthy growth with a year-over-year increase of over 16%.
The bank's asset quality continued to improve, with the gross NPA ratio dropping by 54 basis points to 2.24%, the lowest in over ten years. The net NPA ratio also improved by 10 basis points to 0.57%. The slippage ratio for the year improved by 3 basis points to 0.62%, and the credit cost stood at 0.29%, enhancing by 3 basis points year-over-year. These improvements reflect diligent management and stringent control measures.
Digital banking initiatives are progressing well, with 61% of savings accounts opened through YONO in FY'24. Analytics have significantly boosted business, contributing INR 1.37 trillion sourced through analytical leads, which grew 32% year-over-year. This focus on digitization and analytics positions the bank well for future growth.
Staff costs are projected to be around INR 65,000 to INR 70,000 crores for FY'25. This projection includes a buffer for potential unforeseen expenses. The bank anticipates maintaining ROE consistently above 15%, spurred by a healthy internal capital generation and potential equity raisings as required.
The bank's net interest margin (NIM) increased slightly from 3.41% to 3.43% from December to March. The cost of deposits has plateaued, suggesting that the NIM will remain stable. Looking ahead, the bank aims to capitalize on its strong capital adequacy ratio and significant room for growth.
Subsidiaries and strategic stakes in other companies continue to perform well, creating significant value. The bank remains open to divestments and equity raises based on market conditions to ensure adequate capital for sustained growth.
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Yes, please. Namaste everyone, and good evening, ladies and gentlemen. My name is Sanjay Kapoor and the General Manager, Performance Planning and Review Department of the bank. On behalf of State Bank of India, I am delighted to welcome the analysts, the investors, colleagues and everyone present here today on the occasion of the declaration of the results of the bank for the financial year ending 2024. I also extend a very warm welcome to all the people who are accessing the event through our live webcast.
We have with us on the stage, our Chairman, Shri Dinesh Khara at the center; our Managing Director, International Banking, Global Markets and Technology, Shri C.S. Setty; our Managing Director, Corporate Banking and Subsidiaries, Shri Ashwini Kumar Tewari; our Managing Director, Risk, Compliance and Stressed Assets Resolution Group, Shri Alok Kumar Choudhary; our Managing Director Retail Business and Operations, Shri Vinay M. Tonse; our Deputy Managing Director of Finance, Shrimati Saloni Narayan.
Our Deputy Managing Directors, heading various verticals and Managing Directors of our subsidiaries are seated in the front rows of this hall. We are also joined by the Chief General Managers of different verticals and business groups. To carry forward the proceedings, I request our Chairman sir to give a brief summary of the bank's financial year '24 performance and the strategic initiatives that have been undertaken in this regard. We shall thereafter straightaway go to question-and-answer session.
However, before I hand over to the Chairman sir, I would like to read out the safe harbor statement. Certain statements in today's presentation may be forward-looking statements. These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual outcomes may differ materially from those included in these statements due to a variety of factors. Thank you.
Now I would request Chairman sir to make his opening remarks.
Thank you. Thank you very much. Good evening, friends. Thank you for joining this analysts meet. I would like to start by thanking all of you and all of our stakeholders, including our customers, shareholders, employees and the broader ecosystem for their support and helping us in creating the sustainable value for the economy. Let me first start with a brief description of the present global and domestic economic scenario. Global growth remains resilient with easing inflationary pressures and tight employment conditions in spite of geopolitical and extreme weather event risk. IMF in its latest, April '24 World Economic Outlook raised a global growth forecast for '24 to 3.2%, 10 basis points higher than in its January '24 update and expect the global economy to grow at the same pace in the year '25.
Global headline inflation is expected to fall from an annual average of 6.8% in '23 to 5.9% in '24 and further to 4.5% in '25, with advanced economies returning to their inflation targets sooner than emerging market and developing economies. Commodities and energy prices can drag the economic and growth prospect by infusing certain shocks on the supply side, a collateral impact of escalating geopolitical tensions at multiple fronts. In India, the conditions are, however, shaping up for an upshift in the real GDP growth backed by a strong investment demand and upbeat business and consumer sentiments. CPI inflation has gravitated to 4.9% in March after averaging to 5.1% in preceding 2 months.
CPI inflation is expected to moderate in ensuing months and is estimated to taper to 4.5% in financial year '25 compared to 5.4% average in financial year '24. In financial year '24 credit offtake of all scheduled commercial bank recorded a growth of almost about 20%, while deposit grew by about 13.5%. And the momentum with some moderation is expected to continue in financial year '25 too.
I'll now discuss the bank's performance. Once again, we have delivered excellent numbers. I'm happy to share that our net profit for financial year '24 is the highest ever at INR 61,077 crores showing an increase of 21.59%. Our net profit for the quarter 4 of the financial year '24 also stands at INR 20,698 crores, which has increased by 125% sequentially. This is despite incurring wage revision expenses of INR 13,387 crores during the current year period as per the bipartite wage settlement and after absorbing the additional ability to the tune of INR 7,100 crores relating to pension liabilities and the DR neutralization in the third quarter as a onetime exceptional item.
Our ability to absorb the above liabilities without significantly impacting the long-term profitability outcomes of the bank demonstrate the strength of our balance sheet. However, the bank is now at 1.04% for the whole of the financial year '24. It has improved by 8 basis points over financial year '23. The ROE for the financial year '24 is at 20.32% which has improved by 89 basis points over financial year '23. We have been consistently delivering ROE in excess of 15% for the last 7 quarters.
Our aspiration from our current position of strength is to sustainably deliver the ROE of more than 15% through the wages cycles. The cost-to-income ratio of the bank is at 55.66% including the wage revision expenses and excluding the impact of the onetime exceptional item of pension liabilities and DNS relief neutralization in quarter 3 of financial year '24. Excluding the wage revision and onetime exceptional item, the cost-to-income ratio is actually at 49.34% which is an improvement of 315 basis points over financial year '23. Noninterest income has shown a growth of 41% plus in financial year '24 over financial year '23.
We believe sustaining our profitability at this level highlights the resilience of the underlying value drivers of the bank. The underlying drivers for the sustainable step-up in profitability profile of the bank has been the unmatched size and reach of the bank with INR 50 crore plus customers comprising nearly 35% of the India's population. This is a testament of the continuous trust reposed in us by our valued customers. Our customer-centric approach, the process-oriented culture of the bank strengthened underwriting processes and correct pricing of the risk have all contributed to the sustainable profitability.
Our deposits have grown by 11% Y-o-Y and term deposits have grown more than 16% Y-o-Y. We are mindful of our liability profile as it provides us a stable stream of resources. We continuously monitor the concentration of our deposit profile daily, ensuring that dependency on the wholesale funding is contained within the prescribed levels. We retain reasonable reserve resources in the form of liquid assets over and above the CRR and SLR requirements to meet the future contingent demands and broad-basing the deposit mix. Unencumbered excess SLR was to the tune of about INR 3.7 trillion as on 31st of March '24, and the liquidity coverage ratio stood at 124% as on 31/03/24. All this is above the regulatory benchmark.
I'm happy to highlight that the credit growth has been robust across all the segments. Our retail, agri and SME advances have cost INR 20 trillion. Out of the above, retail personal advances itself constitute almost about INR 13.5 trillion, Agri advances are more than INR 3 trillion, and MSME advances are more than INR 4.33 trillion. They're all going at a pace of 14.68%, 17.92% and 20% Y-o-Y, respectively.
The corporate segment is also showing healthy growth at more than 16% growth on a Y-o-Y basis. I'm glad to share the progress we are making in the digital banking. 61% of our savings bank accounts were opened through YONO in the financial year '24. And we are also leveraging analytics to it [stilt] which has led to the significant business growth and now that number stands at INR 1.37 trillion. All this is sourced through analytical leads showing growth of almost 32% on a Y-o-Y basis. As far as asset quality is concerned, our gross NPA ratio has improved by 54 basis points Y-o-Y and stands at 2.24% as at March '24 and continues to be its lowest in more than 10 years.
Our net NPA ratio has also improved by 10 basis points and stands at 0.57%. Slippage ratio for financial year '24 has improved by 3 basis points Y-o-Y and stands at 0.62%. The consistently improving asset quality is also reflected in our credit cost for financial year '24, which stands at 0.29%. It has improved 3 basis points on a Y-o-Y basis. We are well provided for our loan book with PCR, including AUCA standing at 91.89%, and PCR, excluding AUCA standing at 75%. Our employees are recruited from the best talent in the country and are trained to handle the scale, complexity and the compliance requirements of the bank.
SBI is the employer for life and most of our employees really believe in this. The attrition rate for the bank is only 1.43%. We take great pride in the process-oriented culture of the bank. While we are glad about the outcomes in the current quarter, we are also conscious of our areas of further improvement. On the liability side, we continue to focus on increasing our share in current account while maintaining our leadership in the savings bank deposits. The cost base of the bank is high. However, the same also reflect our focus on compliance and establishment costs.
We aim to lower our cost-to-income ratio by focusing on the income side. Our CET1 ratio stands at 10.36%, which is the highest ever since the implementation of the Basel III norms. Additionally, the current ROE profile of the bank remains above their credit growth trends. And hence, we foresee CET1 accretion going ahead. However, the bank is open to evaluate the options of raising equity if at all the growth trend so warrants. Our subsidiaries are also consistently performing well and continue to create significant value for all stakeholders and most importantly, for the customers of the bank. To conclude, I once again would like to thank you for the support which you have extended, the bank while pursuing its own progress contributes to the progress and growth of the economy and its condiment. We remain committed to rewarding your trust in us with superior sustainable returns over the long term. My team and I are now open for taking questions from all of you. Thank you very much.
Compliments to you, sir. One of the most, I think, outstanding and fantastic results for the State Bank of India. And when we are growing in the range of almost about INR 110 crores of the operating profit on a yearly basis. I mean, going more than 1 lakh -- annualized basis, maybe like INR 1,10,000 crores or INR 1,15,000 crores. So all this net NPA and these figures look very small as compared to our profit-generating capacity. Having said that, my first question is on the recent RBI guidelines on the provisioning.
Now our total, I think [indiscernible] project, which are under implementation as well as might have been completed also. Total loans including CRE altogether maybe about INR 4,50,000 crores. Out of that, how much amount do you feel will come under the purview of these guidelines if it is implemented? And what is the ballpark figure by which we will require to increase our capital adequacy because otherwise also our capital adequacy as compared to some of the peer -- I will not call peer bank, but smaller public sector banks, is much higher than ours and this has always been a concern. Though with this profit added for this year already in the CRAR, we are still at around 14.28%. So going forward and if this particular guideline gets implemented, where do we stand, sir?
Thank you very much, first of all, for all your compliments. The second question which you have raised is essentially relating to a discussion paper, which has been floated by Reserve Bank of India. Well, of course, we have to evaluate it in all entirely. But based upon our experience with Reserve Bank of India for the last couple of years -- now RBI is quite a receptive regulator. They are not ignoring the viewpoint of the banking industry. And I'm sure they would certainly be cognizant of the viewpoint, which will be expressed by IB as well as State Bank of India and its individual capacity as well. So I would not like to hazard any guess but nevertheless, whatever little back of envelope calculation we have done, based upon that, I can only assure you.
Considering the fact that we still have got almost about INR 32,000 crores worth of non-NPA provisions holding in our book and such kind of pockets are many, but I don't want to discuss much of them. But I would only like to say that whatever is -- in the wildest of the thought, whatever could be the additional provision we can absorb it in no time. That is one thing which I would like to say. As far as your assessment in terms of our project loans, I would only like to correct that it is only about INR 1.21 trillion, it is not somewhere around INR 4.5 trillion. So that...
So that is a total infra stage and...
So I think there is a project loan that is essentially applicable for the project loans. But also it has given a glide path. It has to be done in about 3 years' time. So it will leave sufficient room. But nevertheless, what our back of envelope calculation is there, we're not really worried. To be very precise, what we had seen when the ECL paper, ECL discussion paper had come, I remember during that time also, in one of the analyst meet like this some questions were raised. ECL has not become a crystallization as of now. Let us see when it gets crystallized.
But nevertheless, it will be much, much less than what the annual outlay was for ECL. So it is -- I think we are not worried. So I will only say that on a stand-alone basis, we are not worried and of course, if at all, such kind of eventuality will come and will actually get frozen, we will also revisit the pricing if need be.
Sir, what could be the intent, whether the RBI is thinking -- because such a sudden -- and that too straight away with the 5% provisioning maybe over the period of 2, 3 years, are they fearing that some of these projects may not get completed in time or they...
The way I read I will share with you. The intent seems to be that RBI has got some concerns about the right pricing of the risk by some of the lenders. So when the lenders start pricing a 15-year term loan with T-bill, it will naturally raise the concern with any regulator. So that seems to be the concern. But I think my sense is that there will be -- there will certainly be some middle path. I'm quite confident about that. The way they are quite receptive about various regulatory provisions. And I'm hoping for that. But nevertheless, in the worst of the situation also, we are quite comfortable.
Sir, my second question is on the other income. It has almost gone up by almost INR 6,000 crores in this quarter. And out of that, of course, fee definitely must have been increased because of the March quarter INR 6,200 crores to INR 8,700 crores. But there is one item of miscellaneous income, which has gone up from INR 1,807 crores to INR 4,957 crores and these 2 together have given the flip of INR 6,000 crores, almost INR 5,900 crores to the other income, which is added in the profit, of course. So what could be this miscellaneous income going almost by INR 3,100 crores higher in this quarter?
Sir, may I respond sir?
Yes, please. Part of it is, yes you can.
One is the AUCA recovery is included in that. In this quarter, we had much better AUCA recovery, which is part of the miscellaneous inputs. This quarter, we have done INR 1,000 crores more than last quarter.
But included even in the previous quarter also?
Yes. That is the initiative. But other than that, we have also got dividend from our -- and also the CMP commission -- dividend from the subsidiaries and the CMP commission, and also some annual maintenance charges which are normally the highest in the last quarter. These are the 4 reasons.
Sir, in this one item is the profit from the investment is also there, which is INR 3,463 crores. So going forward, where do we stand, sir, as far as the profit in the other income booking from the sale of the investments and revaluation of the investment, sir?
No. I think going forward, with the revised guidance, I think earlier what was required to be done for the MTM and whatever was kept in the AFS, everything was subject to MTM will not have that kind of a situation, if at all, we have got -- and also whatever profit will be there, it will also be routed through the balance sheet, not through the profit and loss also. Anything you want to add, please?
I think with the revised valuation norms, the MTM gains and losses will not be there much. But our effort would be that how do we get the trading gains both on the fixed income portfolio as well as equity portfolio. So that will continue. But as far as the MTM fluctuation, that I think will not be there.
Sir, the last in this round is note number 17, loan transfer, 24 accounts are transferred the NPA accounts, outstanding of INR 7,451 crores. Sir, is it NRCL because the recovery seems to be around 15%, 17%, only 383...
That is an NRCL.
It's NRCL, the entire amount?
Not entire. Around 10 accounts of the bank.
Out of 24 accounts?
Yes.
Yes. Before we move to the second question, we'll just request you to kindly mention your name and company before asking the questions.
This is Manish Ostwal from Nirmal Bang Securities. Excellent performance, another quarter for State Bank and the best performing bank in India right now on all the parameters. So my question for next year, your commentary says that we are anticipating 6.8% GDP growth for the next year? Where do you see the credit growth for the system and where we are at State Bank?
For us, my estimation is that we should be growing -- as far as the loan book is concerned, should be growing at about 13% to 15%.
The second question on the capital consumption this year, excellent capital consumption management we have achieved and I recall one-off during the -- one of the quarterly analyst meet you said, we will grow profit -- use the profit to improve the capital and then raising the funds and you deliver on that front. So now if we maintain the 13% to 15% kind of loan growth, then we should not go for big capital raise, how should one think of your capital base plan?
See, as of now, we have done, we always keep on doing the estimation in terms of what is the ability of our capital to support the growth. So we have done that estimation. And according to that estimation, we can easily grow about INR 7 trillion worth of loan book. Today, we stand at about INR 37 trillion as a loan book, which actually translates to about 21% kind of the growth. And my estimation is that we should be growing as per the loan book is concerned, around 15%.
So as of now, we are in a comfortable vision, and we are quite hopeful about the other options, which are available through the Tier 1 et cetera also. So that also -- but as I have mentioned in the past also, we are quite mindful in terms of our cost of capital which actually works out to be about 14% to 15%. And if at all, we go for raising our Tier 1, we are somewhere around 8%, 8.2%, 8.5%. But net of tax, actually, it is about 5.6% only. So that is something which we have in mind. But yes, of course, we keep on evaluating the situation. If at all, there will be a ripe situation, maybe we'll look into it. But nevertheless, as of now, I feel that we are quite comfortable, and we will -- but nevertheless, we'll be evaluating the situation on an ongoing basis.
And lastly, on the SBI Wealth, what are the things we are doing, what is the AUM under management and that business? Because that is a very strong cross franchisee we can build over long term. Can you share some details over there?
Sure. SBI Wealth, we are in the process of revamping and now we have identified 2 segments. One is the premium banking, the other is wealth banking. And also, when it comes to beyond a particular TRV, we are offering the physical relationship manager. Otherwise, we are offering the virtual relationship manager concept. And we are -- as far as the AUM is concerned, there are opportunities which we are offering the wealth business to those who are already banking with us. So our focus is essentially new to business, if at all, we can get the customers who are new to business.
And earlier, we were having the profile -- age profile of the wealth customer was skewed in terms of more than 6 years. Now we are very clearly indicated that we want to have the younger lot like you. One of you can come to our fold in the wealth and we offer comprehensive services to all of you also so that we should have your mind share also when it comes to wealth. That is something which we are working on. We have already launched a pilot in 2 circles, which is one is Bangalore and the other one is in Bombay. The results are quite encouraging.
And I would say that maybe another quarter or so, we should be in a position to roll out full scale across the country. And when we are going across the country, we are not only confining ourselves to Metro urban, we are going to Tier 3, 4 wherever there is a potential. Since we have got a branch network quality there, we are totally beef up power resources in such locations. And we are going to have a new head also for the wealth banking, who is quite well adapted into this kind of space. And we are quite hopeful that we should be efficient to have AUM of almost INR 1 trillion through the wealth itself in a year or so.
And today, market has recognized your consistent earnings despite of the fall in the market, let's talk [indiscernible], all the best for the coming quarters.
We'll move to the next question now.
Congratulations, sir. So my first question is on the wage provision. You have explained what the run rate will be. Could you share the absolute amount? Because in this year, there are -- I mean at least in this quarter, there are some write-backs also and there is an additional provision. So what will be the run rate monthly or quarterly in employee expenses?
Going forward, we expect that we will have almost about INR 500 crores a month, which means about INR 6,000 crores would be the additional cost. Though we have already -- in the previous year, as far as the wage is concerned, we had provided about INR 13,000 crore-plus. So we will not be required to provide -- I mean, it will certainly come down and actual costs will go up only to the extent of about INR 6,000 crores. So about INR 7,000 crores savings would be there in the wages?
Got it, sir. Sir, and my next question is on your strategic stakes in companies, not your subsidiaries. So would there be any divestments in FY '25? And would that help in your growth capital? Or you would still want to consider an equity raise if growth is stronger?
I think these are all moving parts. We'll have to wait and watch depending upon how the market situation is. And based upon that, we'll be taking the appropriate call. But yes, of course, as I mentioned, we keep on revisiting our capital situation and I have already stated in the past also, capital will never be a custom for the growth of this bank. And we'll ensure that in good time, we have adequate capital. I'll once again repeat that, that is a confidence connection, which we have, and we will stick to that.
Got it, sir. And I have one last question on margins. So what would be your outlook on margins, right, as in that assuming rates are not cut, obviously, there's a rate card, and that will have, but assuming that rates are not cut. What will be the outlook on margins from here on?
See, we have -- as far as our cost of deposits are concerned, we have already plateaued somewhere in the month of October, December only. So I think my sense is that we don't expect the NIM should undergo significant change. If you really look at it, our NIM has actually moved up from 3.41% to 3.43% from December to March. And essentially, when it comes to our international book also, it is almost more or less at the same level, some marginal 5, 6 basis point difference is there. So I think my -- our effort and endeavor would be to maintain NIMs around this level only.
Dinesh, excellent Q4 numbers despite of challenges, RBI circulars, staff cost revisions, it's really wonderful, hats off to you. Now very few specific questions. Now one is what are SBI's and your plans and subsidiaries planned for Gift City? And very specifically, everybody is looking forward to it. And SBI should take the lead in this, specifically if you can articulate.
Number 2 is very clearly what is the growth capital required by SBI for the next 3 years? Any estimates for that and how you are going to raise it? And if we are doing QIP definitely at how much premium because currently our share apparently is very much undervalued considering the excellent results and the excellent outlook?
And number 3, on divestment, very clearly say yes to Yes Bank, a very, very price possession, and there are tops you should not go as per SEBI formula because the way IDBI pricing is there, it is 3x of what happened 2 years back. If you do it kind of an open auction for all stakes, you may even get 2 to 3x the value because it's a very excellent technology bank and our ex-CFO has set all the screws right in spite of what happened in the past. If you can articulate your views on this.
Next is on Ind AS, we were always saying Mr. -- our ex SBI CFO, who went to Jio now has clearly articulated, we have no worries on that. We are fully prepared and you had also quietly shared it when the stocks got a battering, what is the thought process on that, on consultation with the regulators? And specifically, do you expect it post-elections or it will take a long time because it's an overhang, which market has forgotten for a few days?
And also your thought process, how you're engaging with RBI on lots of circulars are there. It's creating a lot of uncertainty. [Foreign Language] after 2 years, it will come, where there's infra circular which has come a few days, will it also become like IDS, nobody really knows, but the market has taken it wrongly in the last few days, your specific answer, I can come back on it.
[Foreign Language] anyhow, your first question is relating to the Gift City and what are our plans in the Gift City. We have got an international banking unit in Gift City, which we opened in the year 2016, '17. And we already have built a balance sheet of INR 7 million over there, which is actually our own outfit -- State Bank of India's outfit. And actually, it is the largest IBU also. That is one.
Secondly, as far as the group companies are concerned, our SBI Mutual Fund has already opened a branch office, which in due course is likely to be upgraded to a subsidiary of the company, which will be based out of Gift City. So that is the other company, which is going there in Gift City. And as far as other companies are concerned, life and our custodial company, et cetera, they are evaluating the options and the appropriate decisions will be taken by the Board of all these companies. Your second question was related -- please kindly repeat the question?
Growth capital.
Growth capital. We have got -- I mentioned earlier also, as per the growth capital is concerned, we are very well placed as far as our capital adequacy ratio is concerned at 14.28%. We have got ample room for raising AT1, and we are hoping some kind of a revisit to the pricing formula for AT1 valuation formula. Not the pricing formula, but the valuation formula. Once that kind of a clarity is in place, we will be in a position to raise AT1 also.
Our ROE is growing at about 20%, and our loan book is growing at about 15%. So that gives us a natural advantage in terms of our ability to plough back and that will continue to be the focus. So if at all, I have to prioritize, the first is the natural plough back which will happen. Second, we will raise through AT1. Third, we will look at the opportunities for raising equity at the right price, if at all required. Because as of now, with the current capital also, with the current capital adequacy ratio, we can grow the balance sheet to INR 7 trillion -- by another INR 7 trillion. Our balance sheet is already INR 37 trillion, and that INR 7 trillion actually translates into about 21%.
So I think I have assured multiple times, and I once again would like to reiterate. Growth capital will never be a constraint for the growth of this bank and the group companies. I assure you once again on that. Your third question was relating to Yes Bank. Yes Bank unable to comment anything as of now because -- but what you mentioned, we will certainly keep in mind. When we go to the Board, we'll keep your suggestions in mind, and we will take appropriate decisions. I will only say this much.
Fourth question. Ind AS. Ind AS ECL kind of a thing, which you are mentioning, at a point of time, we made an assessment for the ECL, the provision requirement was about INR 30,000-odd crores, which is required to be different in about 5 years' time, which works out to be about INR 6,000 crores a year. With a balance sheet profit of about INR 60,000 crores, this does not really worry us at all. But I must also mention that then and now, our quality of book has even improved. So my assessment is that even ECL requirement will also come down. It is simply back of envelope calculation. We have not applied ourselves on this. But nevertheless, since it is not a cause of worry, I'm not really much concerned.
Last question was relating to the recent circular instruction. No. In fact, before that, you had said that how are we engaging with RBI on various circular instruction. Let me assure you, RBI as a regulator is very receptive regulator and since we deal with many other regulators also, I got a chance to say this. But they are very cognizant in terms of what the requirement of the economy are. But at the same time, they want to ensure that the banking systems should stay very well protected. So with that in mind, perhaps, this kind of a discussion paper has been brought out. And I'm quite sure that they are very keen to look at the suggestions, which will be given by IB as well as by us as State Bank of India. And maybe they will even be open to the viewpoint of the various other stakeholders also. The reason why perhaps this kind of a circular instruction has come because in the market we have seen that 15 years project loans, 15 years infrastructure loans are being priced -- linked to the T-bill. I think any regulator will get to it on this.
So I think -- I actually look at it from that perspective. So that is the reason. And more so, this has to be seen in the context when interest rates are expected to start moving up, maybe 6 months, 9 months, whenever, but there could be a possibility. So when the risk is not properly priced, I think regulatory is bound to be concerned. And my experience, my thought about RBI is a very balanced and very mature regulator. So we are very respectful for our regulator. Thank you.
On the group companies, very specifically on the group companies. Group companies our AMC Nippon price market cap has gone up 3x in the last 3 years. HDFC AMC 3x. It's high time we should get it listed and get valuation for that. This is the right time. Same thing for insurance. Now I'll come to our SBI Cards. Why it is underperforming? I feel it will continue to underperform for the next 5 years also. Why? I'd engage with Deputy MD Cards. Now we have a prime reputation prepaying car loans, prepaying home loans, but -- and ICICI, we can keep OneCard FD for a lifetime card. But SBI Card, they are insisting on compulsory FD. Just because we want to use SBI Card for buying on Amazon and Flipkart, today, I lost a INR 2,000 discount because SBI is insisting on an FD deposit of INR 30,000, INR 40,000, but ICICI gives me a lifetime free card, where I can play golf. So I thought why insist on a INR 30,000, INR 50,000 FD when ICICI voluntary, we can give INR 1 crore FD. And this is -- your turnaround branch is not listening to your Deputy MD.
He says refer to me and it needs to improve. That is why it is underperforming and other cards company will flourish. If you can take this seriously and take it up, this will help our companies and the bank in a big way.
We have taken note of your suggestion but only one thing which I would like to mention. I'm very conscious of what you mentioned in terms of the valuation for Nippon Life, HDFC Life. And also, I'm conscious of the challenges being faced by some of these companies on account of getting listed. There's, I think the example of ICICI Securities is before all of us, they listed and they delisted themselves also. So it's a matter of principle essentially because when it comes to entities like Mutual Funds, et cetera, they are more like a knowledge industry. There knowledge capital is required, not the financial capital.
And in fact, for that matter, considering the capital which we have put in there and the net worth, it is significantly high. And I don't want to expose them to quarter se quarter tak, QSQT because if at all I will list them, they will only keep on answering to all of you, and they'll not focus on the product. I don't want to do that. Let them focus on the product and generate return for each one of you. Thank you.
Team SBI, congratulations on excellent performance Sushil Choksey, Indus Equity. Sir, we are moving globally in the right way, globalization and money market, debt market. I think next 12 months, there's going to be a huge inflow where India markets are concerned. And size of SBI may have a larger share to gain off, whether it's our debt portfolio, FX, maybe pricing products as well, how are we placed to garner that profit?
Well, when it comes to the opportunities which are being unfolded on account of debt paper getting included to JPMorgan and Bloomberg also, so we have already activated our custodial company, which is SBI-SG Global Securities. And also when it comes to holding our stock, of debt paper, some of our entities which are in place like SBI DFHI being one, which is a PD, which can actually warehouse all these kind of debt papers also. That is one entity which can hold such paper. Apart from that, our treasury also are holding such papers. So I think we are very well placed in terms of reaping the benefit out of the opportunity which will unfold before us.
Yes, as of now, these are early days. There is some kind of volatility, and that volatility is going to be the way forward for such instruments too. Because the way I read it is, if at all, there is a global scenario where the interest rates in U.S. will go up, it lead to movement in and out, that also is a reality. So I think economy per se will have to really gear up for such kind of volatilities. But nevertheless, as a major lender and also a custodian of all the securities, we have multiple entities where we can warehouse and we can keep stock of it. Once we'll have a visibility of the trend, we will certainly be on the top of the opportunity, I only assure you this.
Sir, the kind of profits we are generating and the strength of human resource which SBI churns out, not only for themselves for the industry and with new generation capabilities which are emerging in the global banking, what are we enabling ourselves at in understanding adoption of technology and human resource? And what kind of CapEx will do to invest in this?
I think more important is to leverage the analytics which gives us enough insight into the customer behavior. And based upon that, if at all, we can offer hyper personalization and the customization which suits the customers' requirement and it is not merely in terms of product and the product features, but it is also in terms of the distribution channel. And knowing all this kind of a trend, we are ensuring that we invest well in terms of the people, product, process and technology. It is not merely within the company, but it is across the group. So that is a broad principle on which we are operating, and we'll ensure that we must not let any opportunity go past us.
This is Jai Mundhra from ICICI Securities. A few questions, sir. Sir, last quarter, we had said that staff costs for next year, FY '25 should be around INR 65,000 crores, right? And we had reduced that fourth quarter could see around INR 22,000 crores rough amount. This quarter the staff cost has been reasonably lower. There are some adjustments that we have done. So does the INR 65,000 crore number for FY '25, does that still hold? Or it could be revised upwards?
It would be somewhere around that only. We expect that INR 65,000 crores, INR 70,000 crores something which we expect, but that is only to take care of the -- what we have not visualized. But otherwise, our additional cost is only about INR 500 crores -- as I mentioned, about INR 6,000 crores per year. So in this one, in this -- if you can go back to the previous slide, in this one also -- go back to the previous slide, please. Yes. Yes. This one also INR 71,000 crores, if you really look at it, herein, we have got additional provision INR 13,387 crores. So if at all INR 57,850 plus INR 6,000 crores would be about INR 63,000 crores. So what we mentioned about INR 65,000 crores, INR 66,000 crores is a reasonable estimation because there would be DA increase, et cetera, which we cannot really visualize as of now. So that's a reasonable estimation.
Sure. And second question is, sir, on your corporate growth, right? So this year and this quarter, we have ended at 16% Y-o-Y. There is a seasonal uptick also in fourth quarter. But going ahead for maybe in 1 year and 2 years, do you think that this 16% has scope to move upward to around, let's say, 20%, maybe driven by whatever the CapEx demand, fresh demand? And do you see any change in the competitive intensity because it looks like some of the large private banks may not prioritize corporate growth at this point of time?
Well, as far as the growth is concerned, the loan growth, in particular for banks like State Bank of India, we always link it up with the GDP growth. GDP growth nominal growth plus inflation plus 2%. That's our principle. And with that in mind, I expect that we should be in a position to grow about 15%, 13% to 15% is my estimation. And we actually get to have opportunities. Since we are present in all subsegments, we have enough opportunities everywhere but we are very mindful in terms of deciding our portfolio so that we should be in a passion to improve our yield on advances for the portfolio as a whole. So that is something which you have in mind. Corporate, we should be in a patient to grow around -- I think overall, we should be in a position to grow somewhere around 13% to 15%.
Any comment on the competitive intensity in the corporate...
Competitive intensity, of course, will give us an opportunity for improving our yield. But I think when it comes to corporate book, private sector banks are there, but the significant partners are also the public sector banks. So I think -- but nevertheless, we have invested well in terms of our capability in terms of processing. We have a PF SBU, which is a strategic business unit, and we have invested very well in terms of building the capability and the near opportunities which are coming, particularly when it comes to EV batteries and also when it comes to cell manufacturing.
So all these are involving some kind of a project evaluation -- comprehensive project evaluation. And if at all we look at our goal eventually to become a part of the global supply chain when it comes to white goods, when it comes to engineering, when it comes to telecom manufacturing, et cetera, et cetera, they're going to infer significant opportunities for these kind of investments.
So I think we have invested well, and that gives us a competitive advantage as compared to others. There could be situations that we will underwrite and then downsell also. But yes, of course, that will generate fee income for us. And we are quite conscious on this particular opportunity, and we want to leverage it to the hilt.
Sir, lastly, we have improved CD ratio this quarter. We have been doing this for the last few quarters. But what is your sense, where can it stabilize? There seems to be some more scope, but what do you think would be the idea?
Ideally speaking for a bank of ours, we would like it to be somewhere around 75%.
This is domestic or...
Domestic, domestic.
This is Akshay from Autonomous Research. So I have 2 questions. One on the credit cost front. So our credit cost has been in the range of around 20, 25 basis points for some time now, which is aiding our ROA, which is above 1%. So now with quantum of recoveries moderating, how do you see credit cost evolving?
I think, of course, what you mentioned in terms of recovery moderating, but nevertheless, if at all, we are required to have lower provisions also, even that will also help us. And that is something which is our effort and endeavor and see in this bank, for such a big bang, we are a very simple mantra when it comes to credit quality. And that mantra is known to everybody in the bank, that their NPA and SMEs should be lower than that of the 31st of March of the previous year.
So on the one hand, our loan book keeps on growing. At the same time, our NPL and SMEs are kept under check, which is all effort elastic. So to make it really happen, everybody is energized to achieve this goal, and that is something which is reflected in these numbers also.
So any specific guidance you'd like to give on the credit cost?
I would like to keep it as low as possible. My effort would be to bring it to 0.25%, but we cannot ignore the risk, which are inherent in the macro. We'll have to live with that.
You guidance has been 50 bps, sir?
Guidance, of course, is 50, but that is for all of you. When it comes to my internal staff, it is as low as possible. I would be responsible for whatever guidance I will give you. I don't want to get -- I should not be held responsible for that. But yes, let me assure you, this is effort and endeavor to do it, to maintain the asset quality as best as possible.
Second question is on the other income front. So other interest income front. So there seems to be a component of IT interest...
Yes, there is.
Yes, INR 1,400 crores.
We keep on paying to them also and we have to have the refunds also. So it's a part of the game. Yes. But nothing unusual.
This is Saurabh from JPMorgan. I have 2 questions. One is on your CASA growth. Your current account growth is just 2% this year. So when you CASA is, I mean, much lower than, let's say, even the private banks, how would you think about your margins for next year? So besides the CD ratio, is there any other flex you have on your NIMs? And the second is on the overhead growth, so you've quantified the staff how would you think about the overhead growth when your loans are growing at about 14-odd percent. Is there any operating leverage there? And just one related question is essentially around the credit cost piece. Your agri NPLs have now come down to 9.5%. Do you think this can fall? Or do you think this stabilizes at around 10%?
The first one is relating to the CASA. Well, CASA is something which the industry as a whole has seen turmoil. And I think as compared to others, we have lost the CASA to the extent of about 280 basis points. This is generally a phenomenal scene when the people are looking for the better yielding asset class and here also, you will see our -- when it comes to our term deposit growth, it is as high as 16%. So that's part of the product feature when we are opening high-value savings bank account, we need to offer them the multi-option deposit scheme, which is actually a sweep beyond the threshold.
So that is something which you've seen. So whatever you are seeing in term deposit is essentially also originating part of it is coming from the savings bank also. The important component here is the current account and current account post the revised business model adoption by the Government of India where just in time has become a reality.
We had reoriented ourselves into the trade commerce industry, trust, et cetera, et cetera, for opening of current account. And we had decent success. We already opened it at more than 40 locations across the country, which are the major markets for our current account and for such kind of a business. Well, at the -- this is the position as at end of the day, but what we keep on monitoring on an ongoing basis is the daily average balance in the current accounts. And there, we got to see a decent growth in the daily average balances.
Apart from that, we are into CMP, we are significantly invested into the technology so that we should offer the best-in-class, the cash management product. So these are the kind of initiatives which we have already taken, and I'm sure with these initiatives, we will be in a position to improve our CASA.
Your second question was relating to Agri NPA, of course. Agri NPA, we have brought it down from 15% to 9%, and our goal is to -- in fact, the target is you have already given us to going into less than 8% and we are quite hopeful that we should be in a patient to achieve it, bring it down somewhere in the range of 6% to 8% in the days to come. So that is our effort, and we are quite hopeful to achieve these numbers also.
So the growth in overheads, basically for next year? I mean, you got actually when it comes it...
Staff cost is the major expense for overheads.
No. In fact, the growth in the overhead, we have got some as research and developmental expenses about INR 1000 crores to INR 1,200 crores. PSLC is the other one. When we are actually building on our agri book, we hope that we should be in a position to reduce our dependence on the PSLC. So that will help us in reducing this kind of increase in overhead too.
Question was extra staff growth, extra staff, the overheads, can it grow slower than loans or no next year?
I think yes, we can. Because as I mentioned that our effort when we are embarking upon Yes [Bank] is essentially to build up excellent agri book which would help us in reducing our dependence on PSLC. That is our effort. We have seen it. As compared to past, we have already seen an improvement in this.
Param from Nomura here. Sir, firstly, on your provisions. So this year, we have seen about INR 4,000 crores of provision write-backs from standard provisions and other provisions that are showing up. Is this something that can continue going ahead? Because your restructured -- coverage on your restructured portfolio is pretty high. So is that something you can keep reversing going ahead? That's my first question.
Yes. You start, I will chip in, yes.
One reversal that we -- work was the MP Automation that has been done by the bank and RBI had asked us to provide 0.5% of the operating income. I think we have reversed how much -- during the quarter, we have reversed INR 900 crores, roughly. That is a major reversal. And then in standard accounts, 2 of the accounts have remained standard for the last 2 years. So we have just returned that back. That's a very normal thing to. Other than that, there's not no one-off...
INR 1,306 6 crores is one item. The other one is INR 370 crores. So other provisions, INR 1,306 crores for what you mentioned -- about what she has mentioned about INR 900 crores. We were required to keep extra present, which we have reversed and standard asset is what is explained.
Sir, you also have a very high PCR coverage on your restructured book, which the other banks don't have. Is that something you'll look to reverse?
We don't resurge any challenge on that. But nevertheless, since we have already provided for it as a matter of abundant caution, we have kept it. But otherwise, the behavior of the restructured loans is actually much better than what we had expected. And the kind of repayment which you are seeing is pretty decent. And I don't think so we will be in need of utilizing that. Apart from that, that is one pocket which you have mentioned. There are many others also [Foreign Language].
So one more question. Sir on the corporate book, this time, quarter-on-quarter, we have seen a very strong growth. And we've not seen it in the large private banks. Of course, you don't have any...
No, they are not really into this activity. They are shying away from this activity.
So is there any inorganic component to it? Is there any inorganic component as in...
No, no, no, we don't do that. We believe in underwriting and downselling. That's what we have in organic. We don't have. We want to build the fee income portfolio.
So we have a few questions coming in through the online webcast.
The first one has come from Mr. Ravi Kiran Lingamaneni. How SBI is expanding its services for NRI as we can see NRI are looking towards private banks or savings?
We have about exclusive NRI branches, and also a completely digital paperless journey is being extended to onboard the NRI customers through a new application. Accounts can be created in as little as 30 minutes with the help of this new journey. And also, apart from that, we have got the centers which we have created only for facilitating opening of the NRI accounts at 2 locations in the country, that is also helping us in ensuring that we have got excellent service, which we can offer. In certain geographies where the regulators permit us to offer NRI services, we are also putting in place our feet on street so that we can garner this NRI deposits also and create value for our valued NRI constituent.
The next question is coming from Amul. And is SBI plan about listing of SBI General?
As I have already mentioned that we would like this company to grow a little more, then we will think in terms of its listing.
Next question is coming from Chintan Joshi, Autonomous Research, London. Can you explain 29% quarter-on-quarter increase in other interest -- other net interest income? Are there any one-offs in this number?
There are no one-offs on this number. It is business as usual, income from interest on IT refund is INR 1,302 crores in quarter 4 as compared to INR 740 crores in the quarter 3 of financial year '24 which is -- actually it keeps on happening.
Another question is coming from Komal Jain. Your comments on the future outlook?
We are expecting a very good business growth in the next couple of years subject to favorable macroeconomic conditions and easing of the geopolitical tensions. We are also focusing on improving our market share, both in deposits and advances. The main driver of business growth will be expansion of digital products and services on our digital omnichannel platform, YONO, to increase efficiencies in the bank. We will continue to focus on booking quality assets and improving asset quality going forward. Here, it would not be out of place to mention that this year, we are seeing more than 30% growth in our book, which we have underwritten with the help of YONO. We expect this trend to even get further strengthen in the days to come with the new offerings, which we are going to have.
Next question is from Priyash Jain from HSBC. What percentage of the loan mix is fixed rate, MCLR link, repo link and others?
So MCLR link, as of now is 36%, 37%. EBLR 27%. Fixed rate is 21%. And others are just 14%. They would be majorly T-bill kind of loans.
And next question is coming from Ankit Pande. What is the impact on us of the RBI's draft guideline on infrastructure project finance?
It's a draft guideline, as I already explained. I'm sure this question is already answered for you.
Next question comes from Rahul K. What is the growth guidance on advances for the next 2 years? What is the quantum of technical return of accounts held and recovery run rate?
As for long-term plans, we expect the growth to be somewhere in the range of 13% to 15%. Outstanding technical write-off is INR 1,75,202 crores, which is actually AUCA book, which we call it, and recovery from the written-off account is INR 6,934 crores.
Another question is from D. Siddharth. Going forward, will SBI outpace the deposit growth of banking industry? Will 2.0 take care of all kind of demands of CASA depositor?
We have taken several steps to increase our market share in deposits. Digitalization, mainly YONO will definitely help in our endeavor to garner more and more quality deposit and much lower cost also.
So these are the questions which we've got offline. Any other questions anybody has got, would be happy to answer. Yes, please go ahead.
This is Piran Engineer from CLSA. Sir, just firstly, following up on his question, will we grow faster in corporate book next year versus the 13% to 15% target just given that HDFC will be slower?
Whether HDFC was a challenge for us in the corporate book, I really don't know. So if they are growing slow, will that gap an opportunity, perhaps that is not the consideration. What matters most is how the macro economy evolves. So if at all, there are opportunities in the macro economy, I assure you, we will go strong.
And sir, just secondly, our fee income, if I look at it over a 5-year period, growth has been like 4%, 5% versus balance sheet growth of 11%, 12%. So what exactly has led to this? And can we expect it to grow in line with loans?
I'll have to come back to analyst meet every quarter and answer to all of you that has led to this growth because I keep on chasing all of my employees that they should go for the loan application fee. I'm not giving any waivers, simple.
It's a more competitive dynamic, the loan processing fees...
See, if at all you can create value, people don't mind paying fee. That's what I believe and we believe in creating value. We believe in financial closures and helping our corporates to go fast for whatever they intend to, and then we do the downselling. This is as a business policy we have decided.
Yes, this is Mahesh from Kotak. Just 2 data keeping questions. One is on the balance sheet, there was a DTA impact on the reserves. Can you just explain what is the -- what's the math behind that?
Sorry?
The net worth, if you look at the movement of net worth, this quarter, it doesn't add up with the earnings that has been reported. We understand that you have taken a charge at the DTA level. If you could just explain what's happened this quarter.
We'll get back to you on this.
I think I have not understood it well, so we'll answer that separately.
In last quarter, you had indicated that there would be a positive impact on the investment portfolio. Has that been completed at the beginning of this quarter?
Yes. We have taken the valuation -- revised valuation that has been implemented from first April. And as we mentioned, I think our initial estimate shows that there's a positive impact on the AFS reserve. As you know, the positive gains have to be reflected in the AFS reserve only.
I mean, is it possible to quantify that? Or we'll have to wait for...
No. We'll have to wait for the quarter ended because this is -- I mean, we need to look at how the portfolio behaves by the end of the quarter.
Perfect. Last question, ma'am, on the staff expenses, it was expected that there will be an incremental rate of about INR 5,000 crores this quarter, it does not happen. If you could just give us an explanation on that?
Actually, we were -- when the agreement happened, we could have a very clear visibility in terms of what to pay and how much to pay. So it has impact in terms of what is the pay slip component, what is the basic pay sector. Based upon that, it was all reassessed and whatever additional provisions are required, they have been booked. And we also had some MTM gain on our corpus for the pension and the [pension] fund also. So that has also helped us in this quarter.
And also the lower liability on gratuity. So we have done some reversals on that because we have already...
We have provided for more on the gratuity also. So that also...
That's why we have reversed around -- so as against our estimate of INR 5,400 crores, we have now done INR 669 crores only, and that takes care of the entire thing.
So this is [indiscernible] from Goldman Sachs. I have 2 quick questions for you. One is on upgrades and recoveries. I want to understand what are your thoughts on how it would trend in the next year? Should the 13% upgrades to opening GNPL be the base case? Or do you see any lumpy accounts coming in next year that could push it forward?
And the second question is on the deposit growth. As of FY '24, your deposit growth year-on-year looks like 11%, which is slightly lower than what we saw for the industry. So what do you see -- how do you see that trending for the next year?
See, when it comes to the recovery, I would say that no lumpy accounts left out. They're all small and sundry accounts which are left out, and the recovery -- but happy to share with you that even in this year also, we had a similar situation. And still, we could make the recovery as about INR 7,000-odd crores. Sorry? So INR 7,000-odd crores as compared to -- no, INR 6,900 crores as compared to about INR 7,000 crores which we did last year. So I think depending upon the stock of such assets, we need to recalibrate our strategies. So that is something which we were doing.
Your second question relating to deposit growth. Deposit growth, we have taken multiple initiatives and with a sharper focus with our complete retail network and also focus on our corporate books also, corporate relationship also, I'm quite hopeful that we should be in a position to improve our percentage growth in the year to come.
Thank you. I trust all the questions have now been addressed. We'll be happy to respond to other questions in offline mode. Let me end the evening thanking the Chairman, sir, the top management team, the analysts, the ladies and gentlemen. We thank you all for taking time out of your schedule and joining us for this event. So to round off this evening, we request you all present here to join us for high tea arranged just outside the hall.
Thank you very much, and have a great evening. Thank you. Bye-bye.