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State Bank of India’s (SBI) shares have fallen nearly 10% in the past two trading sessions to around ₹980, with most of the decline coming after its March quarter (Q4FY26) results announced late Friday.
The trigger: net interest income (NII) growth lagged loan growth. While interest-earning assets, mainly loans and investments, rose 14% year-on-year, NII grew just 4% as asset yields declined sharply.
On advances, management clarified that external benchmark lending rate (EBLR—repo and treasury bill-linked) loans, which account for roughly 50% of total loans, were repriced lower following the RBI’s 25 basis points (bps) repo rate cut in December.
The marginal cost of funds-based lending rate (MCLR) was also reduced by 5 bps, weighing on loan yields.
As a result, domestic net interest margin (NIM) fell 19 bps sequentially to 2.93% in Q4FY26.
On the investment side, interest income declined 3% year-on-year as the bank sold higher-yielding securities.
This move likely helped offset a mark-to-market (MTM) loss of ₹4,522 crore on its bond portfolio due to hardening yields. Overall treasury loss was contained at ₹1,471 crore, implying trading gains of ₹3,051 crore.
The trade-off: lower interest income and NII, but a significantly reduced treasury hit.
Excluding treasury volatility, core pre-provisioning operating profit (PPoP) rose nearly 20% year-on-year to ₹29,174 crore.
A bright spot was fee income. Loan processing charges jumped 55% year-on-year to ₹3,055 crore. Management said it has seen a significant uptick in fees from retail as well as corporates and MSMEs.
Fresh slippages increased 31% year-on-year and 24% quarter-on-quarter. However, overall asset quality improved, with gross NPAs falling 8 bps sequentially to 1.49%.
Management aims to sustain domestic NIM above 3% in FY27 and remains focused on annual rather than quarterly margin trends.
It has guided for 14–16% loan growth and reiterated that credit cost is likely to remain below 50 bps, irrespective of the consequences from the ongoing West Asia war.
If credit costs remain contained and interest rates stabilize or move higher, profitability in FY27 could improve over FY26. Strong traction in fee income and controlled operating expenses could further support earnings.
SBI stock has gained 30% over the past year, while HDFC Bank has fallen 19%. The valuation gap between the two has narrowed significantly.
SBI now trades at a 16% discount to HDFC Bank based on Bloomberg consensus FY27 estimates. SBI’s price-to-earnings multiple stands at 10.6, compared with HDFC Bank’s 12.5, adjusted for the value of listed subsidiaries.
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