SBI Q4 Preview: Profit Seen Dropping on Weak Treasury, Margin Pressure

SBI Weak Performance Expected in Q4FY25

India’s largest lender, State Bank of India (SBI), is set to announce its results for the March quarter (Q4FY25) on May 3, 2025. Analysts anticipate a weak performance for the bank in this period, driven primarily by a decline in treasury income and the expected compression of margins. Although the bank’s net interest income (NII) is expected to grow modestly, its profit for the quarter is forecast to drop sharply.

SBI’s NII is likely to register a growth of 5.3 percent year-on-year (YoY), reaching Rs 43,872 crore in Q4FY25, up from Rs 41,655 crore in the same quarter last year. Despite this moderate growth, the bank’s profit is projected to fall by 13 percent YoY to Rs 17,971 crore, down from Rs 20,698 crore in Q4FY24. This sharp decline in profit is attributed to several factors, including a reduction in treasury income, a key contributor to the bank’s bottom line.

Highlights:

• SBI’s NII is projected to grow by 5.3 percent YoY to Rs 43,872 crore in Q4FY25.

• Profit for Q4FY25 is expected to decline sharply by 13 percent YoY to Rs 17,971 crore.

• The fall in profit is attributed to lower treasury income and narrowing margins.

Impact of Margin Compression

A key factor influencing SBI’s performance in Q4FY25 is margin compression. Analysts from Kotak Institutional Equities expect the bank’s net interest margins (NIMs) to decline by up to 34 basis points YoY, from 3 percent in Q4FY24 to 2.6 percent in Q4FY25. The narrowing of margins is primarily attributed to the rising cost of funds, compounded by the recent interest rate cuts.

SBI, like many other banks, has faced challenges in maintaining its margins as the cost of borrowing has increased. While the central bank’s rate cuts are designed to stimulate growth in the economy, they can also put pressure on banks’ margins, especially in an environment where the cost of funds is on the rise. The reduction in NIMs reflects these broader macroeconomic factors, which could limit the bank’s profitability in the quarter.

Highlights:

• SBI’s NIMs are expected to decline by 34 basis points YoY, from 3 percent in Q4FY24 to 2.6 percent in Q4FY25.

• Margin compression is driven by the rising cost of funds and recent interest rate cuts.

• The narrowing of margins is expected to impact SBI’s overall profitability.

Stable Asset Quality Amid Growing Loan Book

Despite the margin compression, analysts believe that SBI will maintain stable asset quality in Q4FY25. Analysts at Phillip Capital expect no significant issues with the bank’s unsecured loan portfolio, which has been a concern for some banks in recent quarters. The bank’s net non-performing asset (NNPA) ratio is projected to remain steady at 0.5 percent in Q4FY25, the same as in the previous quarter, suggesting that asset quality remains under control.

SBI’s asset quality has been a strong point for the bank in recent years, with the bank consistently managing its bad loans efficiently. This stability in asset quality provides some reassurance, especially considering the headwinds posed by margin pressures and treasury income declines.

Highlights:

• Analysts expect SBI’s NNPA ratio to remain stable at 0.5 percent in Q4FY25.

• No significant issues are anticipated in the bank’s unsecured loan portfolio.

• Stable asset quality continues to be a positive factor for SBI in Q4FY25.

Healthy Loan Growth Amid Financial Headwinds

In contrast to the expected weakness in other areas, SBI’s loan growth is projected to remain robust. Analysts at Mirae Asset Sharekhan forecast a 13 percent YoY growth in the bank’s loan book for Q4FY25, reflecting strong demand for credit across various segments. The growth in loans is expected to be driven by both retail and corporate lending, as the economic recovery continues to support credit expansion.

The strong loan growth will be a key positive for SBI, offsetting some of the pressures from margin compression and lower treasury income. The bank’s ability to generate healthy loan growth despite broader economic challenges reflects its competitive position in the Indian banking sector and its ongoing focus on expanding its lending portfolio.

Highlights:

• SBI’s loan growth is expected to remain strong at around 13 percent YoY in Q4FY25.

• Both retail and corporate lending are expected to contribute to the growth.

• Healthy loan growth will offset some of the challenges posed by margin compression and lower treasury income.

Market Expectations and Stock Performance

Investors are closely watching SBI’s Q4 results, as the bank’s performance in the March quarter could have a significant impact on its stock price. Analysts’ estimates for the quarter are varied, with a wide range of predictions regarding the bank’s profitability and overall performance. As such, any surprises, whether positive or negative, could lead to a sharp reaction in the stock price.

During the January–March period, SBI’s shares declined by 3 percent, underperforming the Nifty 50 index, which rose by 3 percent. This underperformance highlights investor concerns about the bank’s near-term outlook, with some investors taking a cautious stance ahead of the Q4 results.

Highlights:

• Analysts’ estimates for SBI’s Q4 results are diverse, indicating potential for sharp stock price reactions.

• SBI’s shares underperformed the Nifty 50 index in Q1 2025, declining by 3 percent.

• Market participants are closely monitoring the bank’s performance amid broader economic challenges.

Factors to Watch in Q4FY25

Looking ahead, investors will closely monitor the management’s commentary on several key factors during the Q4 earnings announcement. The outlook for margins in FY26 will be a critical area of focus, especially given the margin pressures faced by banks in the current interest rate environment. Additionally, the bank’s return on equity (RoE) and capital adequacy ratio (CAR) for the quarter will provide insight into its financial health and ability to generate returns for shareholders.

As SBI’s Q4 results unfold, the market will be looking for any signs of improvement or deterioration in the bank’s profitability, asset quality, and growth prospects.

Highlights:

• Investors will focus on management’s commentary regarding the margin outlook for FY26.

• Key metrics to watch include the bank’s RoE and CAR for Q4FY25.

• The market will look for indications of profitability, asset quality, and growth potential.