SBI Reports 10% YoY Jump in Q2 Profit to Rs.20,160 Crore, Boosted by Yes Bank Stake Sale; NII Up 3.3%

SBI Q2 Results: Net Profit Jumps 10% YoY to ₹20,160 Crore on Yes Bank Stake Sale Gains; Asset Quality Improves

Mumbai, November 3, 2025:
State Bank of India (SBI), the country’s largest public-sector lender, reported a 10% year-on-year rise in standalone net profit to ₹20,159.7 crore for the July–September quarter (Q2 FY26), driven primarily by gains from the partial sale of its stake in Yes Bank. The bank also posted moderate growth in its net interest income (NII) and improved asset quality, underscoring its steady financial resilience despite a challenging operating environment.

Yes Bank Stake Sale Boosts Profit Growth

A key driver of SBI’s quarterly performance was the proceeds from the divestment of its stake in Yes Bank. The lender sold 13.18% of its equity holding in Yes Bank on September 17, 2025, at ₹21.50 per share, generating a profit of ₹4,593.22 crore.

The bank stated that this gain was recognised under exceptional items and will subsequently be transferred to the capital reserve. Following the sale, SBI’s stake in Yes Bank stands reduced to 10.78% as of September 30, 2025. The remaining investment continues to be classified as an associate on its balance sheet.

This strategic move not only supported the bottom line but also strengthened SBI’s capital buffers, allowing greater flexibility for future growth and credit expansion.

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Core Income Growth Remains Steady

SBI’s net interest income (NII) — the difference between interest earned and interest expended — increased 3.3% year-on-year to ₹42,985 crore from ₹41,620 crore in the same quarter last year.

While NII growth was modest due to narrowing margins and higher funding costs, analysts noted that SBI’s stable loan book and healthy deposit traction helped cushion the impact. The bank’s pre-provision operating profit (PPOP) declined 6.77% YoY to ₹21,000 crore, reflecting subdued treasury gains and elevated operating expenses.

Provisions, however, rose to ₹5,400 crore compared with ₹4,757 crore in the preceding quarter and ₹4,506 crore a year earlier. The higher provisioning was attributed to prudential buffer creation amid macroeconomic uncertainties and a cautious approach toward stressed assets.

Asset Quality Improves Sequentially

SBI continued to strengthen its balance sheet with visible improvement in asset quality during Q2. The gross non-performing assets (GNPA) ratio declined to 1.73%, compared with 1.83% in the previous quarter, and down from 2.1% a year earlier.

In absolute terms, gross NPAs fell to ₹76,243 crore, versus ₹78,039.7 crore in Q1 FY26. The net NPA ratio improved to 0.42%, compared to 0.47% in the preceding quarter, with net NPAs reducing to ₹18,460 crore from ₹19,908 crore.

Analysts said the continued improvement in asset quality reflects SBI’s prudent risk management practices, efficient recovery mechanisms, and robust credit monitoring systems.

Margin Pressure and Loan Growth Outlook

While SBI’s profitability received a one-time boost from the Yes Bank stake sale, the bank faced mild margin compression due to higher cost of deposits and lower yield on advances. The management indicated that margins are likely to remain under pressure in the short term as competition for retail deposits intensifies across the banking sector.

However, credit growth remained healthy, supported by steady demand in the retail, agriculture, and SME segments. The bank is also witnessing an improving trend in corporate credit demand, particularly from infrastructure and manufacturing sectors, which is expected to aid loan growth in the coming quarters.

Market Reaction: SBI Shares Edge Lower

Despite the strong headline numbers, SBI’s stock traded marginally lower after the results announcement. Around 1:30 p.m., shares of SBI were down 0.5% at ₹945.45 on the BSE, as investors booked profits following the recent rally.

Market analysts attributed the muted reaction to the one-off nature of the Yes Bank gain and the pressure on core margins. “While the headline profit growth looks impressive, the underlying NII growth remains subdued. The improvement in asset quality is encouraging, but margin pressure could weigh on near-term earnings momentum,” said a senior analyst at a leading domestic brokerage.

Analyst View: Long-Term Story Intact

Brokerage firms remain largely positive on SBI’s long-term prospects, citing its strong retail franchise, robust capital position, and improving operational efficiency.

“Excluding the Yes Bank stake sale, SBI’s core performance remains stable, supported by consistent loan growth and improving credit quality. The bank’s digital transformation, strong deposit base, and leadership in the retail segment provide a strong foundation for sustained growth,” said an analyst from Motilal Oswal Financial Services.

Additionally, the continued decline in NPAs and healthy recovery trends are expected to support lower credit costs in the second half of FY26.

Outlook: Focus on Sustainable Profitability

Going forward, SBI is expected to focus on sustainable profitability through margin optimization, growth in high-yield loan segments, and digital-led efficiency. The bank’s management has indicated plans to enhance its retail lending portfolio, strengthen SME lending, and maintain strong provisioning coverage.

While external factors such as interest rate trends and deposit competition could influence short-term performance, analysts believe SBI’s balance sheet strength and strategic growth initiatives will help it maintain leadership in India’s banking sector.

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