S&P Global Ratings has affirmed State Bank of India's (SBI) ability to manage risks associated with its rapidly expanding personal loans sector while maintaining profitability. The personal loans segment, which constitutes 9% of SBI's total loan portfolio, is primarily extended to military and government personnel (83%) and employees of public sector entities and blue-chip private firms (12%), thereby minimizing risk.
The bank's non-performing loan (NPL) ratio in this segment is relatively low at 0.7%. This comes at a time when there is increasing stress in the small-ticket personal loans sector within India's financial industry. Despite this, SBI's asset quality, which includes significant exposure to unsecured retail loans (13% of total loans), is expected to remain stable.
As of the end of September 2023, the bank's NPL ratio across all major segments had decreased to 2.6%, down from 3.5% the previous year. Restructured loans remained low at 0.6% of total loans. Over the six months ending on September 30, 2023, SBI reported a return on assets of 1.1%.
Looking ahead, S&P Global Ratings projects a credit growth of 13-15% for SBI over the next 12-18 months. This growth is expected to be driven by retail and small business loans, with an anticipated upswing in corporate growth in future quarters.
The rating agency also predicts that the bank will maintain low credit costs amid stable employment conditions in India. This stability would help ease pressure on margins from higher deposit costs.
InvestingPro Insights
In the context of the article, the following InvestingPro Tips and Data offer valuable insights for the readers.
InvestingPro Tips indicate that SBI has been experiencing accelerating revenue growth and consistently increasing earnings per share. This aligns with the article's mention of SBI's successful management of risks in its rapidly expanding personal loans sector. However, it should be noted that the bank is quickly burning through cash, which could potentially impact its dividend payouts in the future. Despite this, SBI has a history of raising its dividend for 3 consecutive years, indicating a commitment to shareholder returns.
From the InvestingPro Data, we can see that SBI has a market capitalization of 101.28M USD. The bank's revenue for the last twelve months as of Q2 2023 stands at 6.17M USD, showing a growth rate of 5.67%. This data supports the article's projection of credit growth for SBI in the coming months.
To gain access to more insights like these, consider exploring InvestingPro's comprehensive suite of investing tools and resources. Currently, there are 18 additional tips available for SBI on InvestingPro.
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