Core Viewpoint - The State Bank of India (SBI) is expected to report mixed financial results for Q2FY26, with healthy loan and deposit growth offset by continued pressure on margins and treasury income [17]. Profit After Tax (PAT) - Brokerages estimate PAT to be in the range of Rs 17,700–Rs 18,800 crore, indicating a year-over-year decline of 2% to 17% and a sequential fall of up to 20% [17]. - Specific estimates include: - Nomura: Rs 17,730 crore (-3% YoY, -7% QoQ) [2] - Emkay: Rs 18,771 crore (+2.4% YoY, -2% QoQ) [17] - JM Financial: Rs 17,702 crore (-3.4% YoY, -7.6% QoQ) [5] - Axis Direct: Rs 15,282 crore (-16.6% YoY, -20.2% QoQ) [5] Net Interest Income (NII) - NII is expected to remain largely flat year-over-year due to rising funding costs and subdued treasury gains [7]. - Estimates for NII include: - Nomura: Rs 41,440 crore, flat YoY and up 1% QoQ [17] - Emkay: Rs 41,172 crore, down 1.1% YoY and up 0.2% QoQ [12] - JM Financial: Rs 41,165 crore, down 1.1% YoY and up 0.2% QoQ [12] - Axis Direct: Rs 40,499 crore, down 2.7% YoY and down 1.4% QoQ [12] Net Interest Margins (NIMs) - NIMs are expected to contract further due to higher deposit costs and slower loan yield transmission [9]. - Estimates for NIMs include: - Nomura: 2.8%, down 32 bps YoY and 8 bps QoQ [9] - JM Financial: 2.6%, down 29 bps YoY and down 7 bps QoQ [9] Pre-Provision Operating Profit (PPOP) - Operating performance is anticipated to soften due to lower treasury gains and modest NII growth [10]. - Estimates for PPOP include: - Nomura: Rs 28,300 crore (-3% YoY, -7% QoQ) [10] - Emkay: Rs 28,028 crore (-4.3% YoY, -8.2% QoQ) [13] - JM Financial: Rs 28,102 crore (-4.1% YoY, -8% QoQ) [13] - Axis Direct: Rs 25,703 crore (-12.3% YoY, -15.8% QoQ) [13] Provisions - Axis Direct expects provisions to be slightly higher at Rs 5,138 crore (+14% YoY) [11]. - Most brokerages believe slippages and credit costs remain under control, indicating no major stress in the loan book [11]. Loans and Deposits - Loan growth is seen as a bright spot, driven by retail and corporate segments [14]. - Estimates for loans and deposits include: - Nomura: Loans at Rs 43.22 lakh crore (+12% YoY, +3% QoQ), deposits at Rs 55.83 lakh crore (+9% YoY, +2% QoQ) [14] - JM Financial: Loans at Rs 43.09 lakh crore (+11.7% YoY, +2.7% QoQ), deposits at Rs 56.10 lakh crore (+9.6% YoY, +2.5% QoQ) [14] Credit Cost - Credit cost is expected to remain benign, indicating continued asset quality stability [15]. - Estimates for credit cost include: - Nomura: 0.5% (down 5 bps YoY, 3 bps QoQ) [15] - JM Financial: 0.4% (down 6 bps YoY, 4 bps QoQ) [15] Key Monitorables - Brokerages will monitor the outlook on NIMs amid rising funding costs [16]. - The trajectory of loan growth across retail and corporate segments will also be a key focus [16]. - Investors should pay attention to management commentary on asset quality trends, slippages, recoveries, and guidance on credit costs and deposit mobilization strategy [16].

Financial Data and Key Metrics Changes - The bank's average deposits grew at a healthy pace of 16% year-on-year, while average advances or assets under management (AUM) growth slowed to about 7% last year, aligning with strategic objectives to reduce the credit deposit (CD) ratio from 110% to about 95% [6][9] - The growth in AUM improved to 8% in the quarter ended June FY '26, with expectations for loan growth to continue improving [6][7] Business Line Data and Key Metrics Changes - The bank's asset quality remains healthy, with a gross non-performing loan (NPL) ratio in the retail segment, excluding agriculture, steady at 82 basis points [101][104] - The bank is seeing healthy demand from the rural side, with positive inquiries expected to increase due to better monsoon conditions [22][24] Market Data and Key Metrics Changes - The bank's credit deposit ratio is currently at 95%, with a medium-term target to return to levels of 87-88% prior to the merger [92][93] - The bank's approach to growth is focused on customer-centricity, technology, and people, with expectations for loan growth to align with system growth rates in FY '26 and exceed it in FY '27 [7][8] Company Strategy and Development Direction - The bank aims to improve its loan growth while maintaining a focus on reducing the CD ratio, with a strategic shift towards upselling products to existing customers [44][45] - The management emphasizes the importance of customer experience and technology initiatives to drive growth in various segments, including rural, MSME, and corporate [66][68] Management's Comments on Operating Environment and Future Outlook - The management acknowledges a volatile global situation but remains optimistic about India's stable macro environment, supported by domestic factors such as normal monsoons and tax cuts [4][5] - The management expects a pickup in demand during the festive season, which could serve as a trigger for growth [20][24] Other Important Information - The bank announced an interim dividend of INR 5 per share and recommended a bonus share issue in a 1:1 ratio [10] - The bank's contingent provision increased to 57 basis points of the loan portfolio, aimed at providing resiliency and a strong reserving position for the future [99] Q&A Session Summary Question: Margin and EDLR Repricing - The management explained that the full impact of recent rate changes on the EDLR book will take one to three months to fully reflect, with a current yield change of about 20 basis points [18][19] Question: Growth Triggers - Management indicated that improved consumption demand, especially during the festive season, is expected to trigger growth, with a focus on retail and rural segments [20][21] Question: Asset Quality and NPL Recognition - The management confirmed that any one-time settlements would typically lead to NPL recognition, following RBI regulations [35] Question: Credit Cost Outlook - The management noted that credit costs are expected to remain benign, with seasonal fluctuations due to agricultural portfolios [37] Question: Loan Growth and Fee Income - The management acknowledged subdued fee income this quarter but remains optimistic about the overall outlook for the year [82][83] Question: CD Ratio Comfort Zone - The management aims to return the CD ratio to 87-88% in the medium term, with a focus on ensuring deposit growth outpaces loan growth [92][93] Question: Contingent Provision Explanation - The management clarified that the contingent provision is based on various probability scenarios and is intended to strengthen the bank's reserving position [99]