Considering the quarterly results released by SBI, is it advisable to make a purchase?
SBI, the largest commercial bank in India, is navigating a mixed picture in its corporate and retail loan segments, influenced by the slowing economy and changing interest rates. For 2025, SBI anticipates a loan growth rate of around 12% overall, in line with the industry average[1].
In the retail loan segment, home loans remain a key growth driver. SBI's mortgage book expanded significantly by around Rs 20,000 crore in Q1 2025, with total retail credit rising 15% year-on-year[1]. However, home loan growth has decelerated compared to previous years, with RBI data showing a slowdown to 9.6% year-on-year growth in June 2025[2]. In response, SBI recently increased home loan rates by 25 basis points in August 2025, signaling an effort to protect net interest margins in a falling interest rate environment and maintain profitability on low-yielding products[4].
On the corporate loans side, growth has slowed amid a challenging economy. There are reported prepayments and refinancing by corporate borrowers at lower rates, and shifts toward commercial paper markets for short-term borrowing. SBI is cautious about aggressively cutting rates on some corporate loans to preserve risk-adjusted returns, typical in a declining interest rate phase[2]. Despite these headwinds, SBI remains optimistic about surpassing 10% growth in corporate loans, fueled partly by structural demand and ongoing recovery, although moderated by cyclically low credit costs[1][5].
SBI's retail loan segment, especially home loans, is driving overall loan growth, albeit at a moderated pace with a recent uptick in retail lending rates to support margins. The corporate segment is expected to grow moderately above 10%, balancing slower demand and competitive pressures with disciplined pricing.
The bank's capital position is strengthening through internal accruals and asset sales, which underpins its ability to sustain growth and asset quality in the evolving macroeconomic and rate environment[1]. As of now, SBI has a large sanction pipeline of ₹7.2 lakh crore yet to be disbursed[3].
A revised SOTP target price of ₹980 has been set for SBI, indicating a 22% upside potential[3]. Despite a brief rally to ₹875, the stock has largely remained under the recommended price of ₹816[3].
References:
- SBI expects loan growth rate of around 12% in FY26
- SBI's home loan growth decelerates amid slowing economy
- SBI's Q1 results show growth, improved asset quality, and maintained margins
- SBI raises home loan rates to protect margins
- SBI to surpass 10% growth in corporate loans
- SBI projects a 12% overall loan growth rate for 2025, aligning with the industry average.
- Home loans are the key growth driver in SBI's retail loan segment, with the mortgage book increasing significantly in Q1 2025.
- Despite the increased home loan rates by SBI, growth in the retail loan segment has decelerated compared to previous years.
- In the corporate loans segment, SBI is cautious about lowering rates to maintain risk-adjusted returns and protect margins in a declining interest rate environment.
- SBI anticipates moderately surpassing 10% growth in corporate loans, fueled by structural demand and ongoing recovery.
- SBI's capital position is strengthening due to internal accruals and asset sales, enabling the bank to sustain growth and maintain asset quality.
- A revised SOTP target price of ₹980 for SBI indicates a 22% upside potential, with the stock remaining largely under the recommended price of ₹816.
