The quarter in one table

The call and the levels

Permit me the trader's courtesy of leading with the levels. DRChoksey has kept its BUY and pegged fair value at Rs 1,272 a share on a sum-of-the-parts basis, roughly 20 percent above the ruling quote of Rs 1,062. The scrip has traded between Rs 799 and Rs 1,235 over the past year, so the target reaches just beyond the recent peak. At the current price the stock changes hands at about 1.2 times estimated FY28 adjusted book value for a franchise still delivering a return on assets near 1 percent.

How the Rs 1,272 target is built

The valuation is a sum of two parts. The standalone bank is anchored at 1.2 times its estimated FY28 adjusted book value of Rs 764.5, worth Rs 917 a share. To that the brokerage adds Rs 355 a share for SBI's listed and unlisted subsidiaries — the insurance, asset-management and card arms — net of a 10 percent holding-company discount. The two combine into the Rs 1,272 objective.

Margins: the compression is bottoming

The single most consequential line in the release is the margin. Domestic net interest margin held at 3.0 percent, a roughly 7-basis-point sequential gain driven entirely by a lower cost of deposits. With the repo rate parked at 5.25 percent, the incremental repricing of external-benchmark loans is largely done, while high-cost term deposits continue to roll over at cheaper rates as they mature. This is the textbook late-cycle dynamic in which asset yields stabilise while funding costs keep drifting lower, arresting the compression seen through the prior easing cycle. Net interest income rose 14.4 percent year-on-year to Rs 46,992 crore, ahead of the Rs 43,206 crore the brokerage had pencilled in.

Growth: total business past Rs 110 lakh crore

Business momentum remains brisk and broad-based. Advances swelled 18.9 percent to Rs 49.9 lakh crore and deposits rose 9.7 percent to Rs 60.1 lakh crore, carrying total business beyond Rs 110 lakh crore. Retail term deposits grew 14 percent and savings balances 10 percent, leaving the low-cost CASA ratio resilient at 39.2 percent despite an industry-wide deposit squeeze, with excess statutory holdings of about Rs 3.6 lakh crore providing ample deployment headroom. Management tempered the optics, noting the 18 percent print flattered by a soft year-ago base, and guided full-year credit growth to a steadier 13 to 15 percent, anchored to nominal economic growth plus a few percentage points.

Asset quality: multi-decade lows, one seasonal wrinkle

The balance sheet remains pristine. Gross and net non-performing assets held at 1.5 percent and 0.4 percent respectively, their lowest in over two decades. The one blemish was a rise in fresh slippages to Rs 7,046 crore from Rs 5,500 crore — split between agriculture, small business and personal loans — with small-business slippages roughly doubling. Management pointed to about Rs 1,400 crore of pull-backs after quarter-end and characterised the uptick as seasonal rather than structural. Provision coverage stayed robust, and the brokerage treats the small-business slippage as a line to monitor rather than a threat to its thesis.

Operating leverage: the opex bump, smoothed

A quieter driver of the beat was cost discipline. Operating expenses fell 13.5 percent sequentially to Rs 29,386 crore, as management shifted to amortising bulk charges evenly through the year — including a roughly Rs 3,000 crore performance-linked-incentive charge now booked a quarter at a time rather than lumped into the fourth quarter. The upshot was a cost-to-income ratio that improved sharply to 46.7 percent from 55.1 percent, and a pre-provision profit up 21 percent sequentially to Rs 33,529 crore. Because provisions normalised off an unusually low March-quarter base, rising 75.7 percent to Rs 5,047 crore, the operating-leverage story is what carried the bottom line to its record.

Risks worth watching