SBI sees U-shaped margin recovery ahead, says NIMs to stay above 3% in H2

SBI eyes steady margin recovery on lower funding costs and stable deposits

State Bank of India (SBI) were upbeat on its margin outlook after posting a steady set of second-quarter earnings, indicating that its net interest margin (NIM) is likely to recover in a “U-shaped” trajectory over the next few quarters, supported by easing funding costs, improved liability management, and the full benefit of the recent CRR cut.

The management, addressing analysts during the post-results concall, noted that while margin pressures have started to ease, a sustained recovery would depend on the broader interest rate environment.

“Assuming there’s no further rate cut in December, we believe the recovery in NIM will follow a U-shaped curve, slightly front-loaded because of our better liability management, both on cost of deposits and cost of borrowings,” the management said.

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The lender reaffirmed its earlier guidance that NIMs will remain above 3 percent in both Q3 and Q4 of FY26, supported by the combination of a stable deposit base, better funding mix, and ongoing repricing benefits.

“We will continue to focus on CASA, which remains a very critical component in bringing down the cost,” the management said, underlining that improving deposit granularity and maintaining cost discipline will be key to sustaining profitability.

The bank also highlighted that the repricing of fixed deposits—a key factor influencing funding costs—generally takes 12 to 14 months. Having completed nearly two-thirds of that cycle, SBI expects the remaining one to two quarters to see further improvement as older high-cost deposits roll off.

“The flow is not getting too much repriced because I don’t think any of us would be re-looking at adjusting the fixed deposit rate of interest unless there’s a rate action by the RBI,” management added.

For the September quarter, SBI’s overall NIM stood at 2.97 percent, with domestic NIM at 3.09 percent. For the first half of FY26, the overall NIM averaged 2.93 percent and the domestic NIM 3.05 percent, suggesting that margins have likely bottomed out and are now on a gradual recovery path.

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