SBI Q2 Earnings Beat Expectations: 5 Key Takeaways

State Bank of India (SBI) delivered a quarter that exceeded expectations in Q2 of FY26, with several encouraging signals emerging from the numbers and management commentary. While challenges remain, the bank’s performance suggests it is navigating the evolving environment with resilience. 

Solid profit growth backed by exceptional gain and stable operations 

During the quarter ending September, SBI reported a standalone net profit of approximately ₹20,160 crore, up about 10 percent year-on-year. The growth was significantly influenced by an exceptional gain of roughly ₹4,593 crore arising from the sale of its 13.18 percent stake in Yes Bank, which added a one-time boost to the bottom line.  

Operating profit also improved, rising to around ₹31,904 crore, up close to 9 percent compared to the same period a year ago. Net interest income increased by about 3.3 percent to near ₹42,985 crore, pointing to core banking operations contributing alongside the special item. 

Margins still under pressure but showing tentative improvement 

SBI’s domestic net interest margin (NIM) stood at approximately 3.09 percent during the quarter, down around 18 basis points versus the same quarter last year. On a sequential basis, however, the margin registered a modest uptick of roughly 7 basis points, signalling that margin headwinds may have started to ease.  

A stabilising NIM is particularly meaningful because funding costs are under pressure and spreads have been compressed across much of the banking sector. The fact that NII rose despite margin pressure underscores the bank’s ability to grow volumes and maintain yields to some degree. 

Growth remains broad-based, supported by healthy deposits 

On the asset side, SBI recorded advances growth of about 12.7 percent year-on-year, with domestic advances increasing around 12.3 percent. Within the advance book, retail loans expanded around 15 percent, SME advances close to 19 percent, and agriculture about 14 percent. On the funding side, deposits increased by about 9.3 percent year-on-year, and the CASA (current account plus savings account) ratio stood near 39.6 percent.  

This combination of solid credit growth and deposit mobilisation suggests the bank is growing in a relatively balanced fashion, which is important in a period of rising term deposit costs. The bank also raised its full-year loan growth guidance to 12-14 percent, reflecting confidence in demand and execution. 

Asset quality remains best-in-class with comfortable buffers 

The bank’s asset-quality performance was broadly encouraging. Gross non-performing assets (GNPA) declined to approximately 1.73 percent of advances, down from about 1.83 percent a year earlier. Net NPA stood at around 0.42 percent, improved versus prior comparable. The credit-cost metric was contained near 0.39 percent, and the provision-coverage ratio (PCR) reached approximately 75.8 percent.  

Capital adequacy remained comfortable, with a reported capital-adequacy ratio near 14.62 percent. The combination of low slippages, healthy coverage and a strong capital base provides a sturdier foundation for growth and for absorbing any unexpected stress. 

Scale, market reaction and key areas to monitor ahead 

Beyond the numbers, several qualitative developments are worth noting. SBI crossed a landmark figure of ₹100 lakh crore in total business (advances plus deposits), underlining the size and dominance of its franchise. The stock reacted positively, trading near record highs as the results were unpacked.  

Looking ahead into H2 of FY26, three key areas will influence sentiment: (a) the margin trajectory — whether the sequential improvement in NIM can be sustained or accelerate; (b) execution of the growth agenda — whether the bank is able to deliver the raised guidance without compromising asset quality or cost of funds; and (c) durability of asset-quality metrics — whether current low levels of NPAs and slippages remain manageable as the economy evolves and competition intensifies. 

Final thoughts 

In summary, SBI Q2 performance for FY26 reflects a robust outcome in a challenging environment, with a mix of favourable one-time items, steady operating dynamics and strong asset-quality metrics. The bank appears well-positioned to navigate the remainder of the year, provided funding cost pressures remain manageable and growth execution stays disciplined.