At India’s largest bank, all focus is on quality customers

MUMBAI: State Bank of India may be on a higher path by joining the race for customer funds without resorting to a rate war, but its outlook suggests the industry’s struggle for deposit growth will continue.

India’s largest bank on Friday cut its deposit growth guidance for 2024-25 to 10-11% from 12-13% as customers may now find more profitable avenues to invest. Slowing deposit growth remains a concern for the industry.

SBI Chairman CS Setty, who took over from Dinesh Khara in late August, said the bank has introduced new products, value-added services and quality banking services to attract quality customers.

“We want to compete on the quality of customer service, not on raising deposit rates, and at the same time we fully compensate customers in terms of interest rates,” Setty said, reiterating his stance that SBI will not engage in interest rate wars to attract customers. Customer Deposits.

State-owned banks are redoubling their efforts to attract savers, offering them the highest average fixed deposit rates in nearly eight years, Mint reported.

The banking industry has been grappling with deposits growing faster than credit and SBI is no exception. Deposits grew 9.1% in the second quarter ended September 30 $51.17 trillion, credit growth 14.9% $39.2 trillion.

For 2024-25, SBI maintained its loan growth forecast of 14-16% while downgrading its deposit growth outlook.

ALSO READ | Earnings review: Three takeaways from banks’ second-quarter results

Setty says SBI deposits have ‘crossed milestone’ $50 trillion at the end of the second quarter, and banks have taken steps to attract more deposits.

“We have launched our largest branch network to do this. Everyone’s job is focused on deposits. Our effort is to leverage technology and leverage,” he said after announcing the bank’s quarterly results.

“We acquired nearly 1 million payroll accounts this year. For corporate payroll accounts, the average balance was $110,000, which means well-funded savings accounts are being attracted,” he said.

SBI reports net profit of $183.31 billion rupees in the three months ended September, an increase of 27.9% over the same period last year. The total non-performing loan rate in the second quarter was 2.13%, a decrease of 42 basis points from the same period last year and a decrease of 8 basis points from the June quarter.

ALSO READ | As deposit growth accelerates, focus turns to bank profitability and asset quality in Q2

Analysts seemed relieved that the state-owned bank’s asset quality remained stable.

“The biggest relief is the absence of any significant deterioration in asset quality,” analysts at Sanford Bernstein (India) said in a note to clients on Friday. “However, we believe that weak deposit growth and weak core revenue growth may limit the stock market reaction given the already healthy P/E ratio (and the 5-7% gain over the past two weeks).”

Shares of State Bank of India closed on the Bombay Stock Exchange on Friday at $843.25 per share, down 1.86% from the previous trading day’s closing price.

Strong corporate credit

On the unsecured lending front, Setty said some banks are starting to see an increase in asset quality deterioration and SBI’s quality remains strong. “The demand for unsecured personal loans has slowed down. We have said that 95% of our unsecured personal loans are for salaried workers, whose salary is collected through SBI accounts.

The bank’s corporate credit grew 18.4% in the second quarter, exceeding retail growth of 12.35%. Setty said SBI’s corporate credit pipeline is approx. $6 trillion. These are loans that have been approved but have not yet been tapped or used.

ALSO READ | As pressure on asset quality increases, banks tighten underwriting and slow down lending to microfinance institutions

Among corporate clients, SBI is not keen on providing funds to airlines, Sethi said. The Supreme Court on Thursday ordered the liquidation of Jet Airways after years of insolvency resolution proceedings.

“Not many airlines can get funding right now. We provide funding to airlines based on ownership, not necessarily based on the airline’s operating parameters, but that’s important from a credit underwriting perspective as well,” Sethi said, adding , the bank will not make any big bets on the aviation industry in the future.