SME, agri, corporate may take SBI loan growth past industry average

Xpress Credit portfolio, which declined in Q2, also expected to rebound

State Bank of India (SBI), the country’s largest lender, has projected loan book growth of 14–16 per cent year-on-year (Y-o-Y) for 2024-25 (FY25), driven by small and medium enterprise (SME), agriculture, and corporate segments.

 

This comes after a moderation in credit growth in the banking system to 11.5 per cent Y-o-Y till October 18 this financial year. The industry is projected to post credit growth around 13 per cent Y-o-Y in FY25.

 

SBI has also indicated that this incremental credit growth will be supported by a corresponding rise in deposits, expected to increase by over 10 per cent Y-o-Y, driven by focused deposit mobilisation efforts.

 

 

“Management is confident of above-industry loan growth of 14–16 per cent in FY25E. While Xpress Credit (SBI’s real-time personal loan disbursal system for salaried customers) will rebound, the corporate sanction pipeline has increased to Rs 6 trillion from Rs 4 trillion, which will boost growth in corporate credit,” said analysts at Nuvama Institutional Equities, adding that SME growth will also remain strong. “Management expects double-digit deposit growth for FY25E and does not see deposit growth as a constraint to loan growth,” they added. 

 

A Motilal Oswal report said that for SBI, Xpress credit growth (personal loans) is regaining momentum, with high turnover and an average tenure of 14 months. “Growth in secured credit is likely to continue, backed by a strong corporate proposal pipeline totaling Rs 6 trillion, with additional growth expected from increased working capital utilisation,” the report noted.

 

Separately, India’s largest private-sector bank, HDFC Bank, has indicated that its loan book growth will be slower than the industry average as it looks to bring down its elevated credit-deposit (CD) ratio, which has dampened credit growth across the industry.

 

Last week, SBI reported its Q2 earnings, showing a 28 per cent Y-o-Y increase in net profit, beating Street estimates. This growth was driven by a sharp rise in non-interest income, including treasury and foreign exchange earnings.

 

However, SBI’s margins moderated by 8 basis points (bps), which is attributable to higher funding costs. Management expects to maintain net interest margins (NIMs) in line with FY24 levels (3.3 per cent), as rate hikes on MCLR loans — accounting for 42 per cent of its loan book — are expected to provide some cushion to NIMs in the coming quarters, according to a Macquarie Research report.

 

“Management continues to target 14-16 per cent loan growth in FY25 driven by SME, agriculture, and corporate segment,” the report said.

 

As for deposit growth, the SBI management has said it would like to continue its focus on increasing its share in current accounts (CA) and maintain leadership in savings accounts (SA) by expanding customer outreach and branch networks.

 

Nuvama’s report highlighted SBI’s various initiatives to grow current accounts, such as reducing reliance on government accounts, re-engaging business accounts, establishing a relationship manager team for standalone accounts, and positioning current accounts as a multi-service programme. SBI’s shares closed 0.54 per cent higher on the BSE at Rs 847.80.