June-quarter net profit at State Bank of India (SBI), the country's most-valued government entity, beat market expectations to climb 10% year on year due to strong loan growth that boosted operating income and helped offset lower treasury revenues.

The stock, which spiked more than 3%, climbed more than 1% at the end of trading.

Net profit increased to ₹21,121 crore in the quarter ended June, from ₹19,160 crore a year ago, on higher net interest income (NII), or core earnings from lending. Analysts polled by Bloomberg expected the bottomline to shrink 1% to ₹19,052 crore.

NII, or the difference between interest earned on loans and that paid for deposits, increased 15% year on year to ₹46,992 crore.

Expects $10b from FCNR(B) Deposits

Total advances increased 19% to ₹50.47 lakh crore in the June quarter due to identical 18% business expansions in both corporate and retail, agriculture and SME (RAM) segments. Asset quality at India's biggest mass lender - the only government entity with a market capitalisation of more than $100 billion - was the best in nearly two decades.

Chairman CS Setty said the bank remains confident of robust loan growth, despite geopolitical uncertainties, due to the inherent resilience of the Indian economy. "Given the GDP estimates and our own projections, we expect credit growth to be between 14% and 15% this year," Setty said. "On the deposit side, we expect some uptick due to the FCNR(B) deposits in the second quarter, which means we will have excess liquidity and expect a deposit growth of 10% to 11%."

The Reserve Bank of India (RBI) Wednesday marginally raised the country's FY27 growth estimates, with expansion in the first half of the fiscal year being likely higher than the central bank's earlier forecasts.

Deposit growth-at 10% on-year to ₹60.05 lakh crore-lagged the pace of credit expansion. The bank has a corporate loan pipeline of ₹3.58 lakh crore.

Setty said the bank expects to raise $10 billion through the concessional special FCNR (B) deposit scheme, and that it has garnered $6 billion so far. He said the bulk of the deposits are coming from the UAE, via the Gift City branch.

Fund inflows from this special scheme and the excess liquidity SBI currently has will be enough for the lender to fund its targeted loan growth, Setty said.

"We have an excess liquidity of ₹4 lakh crore in statutory liquidity ratio (SLR) securities. We will use this liquidity power based on market rates and decide whether to access the bulk deposit market," he said. "We do not think the impact of these FCNR (B) flows will be either positive or negative on liquidity."

The bank's net interest margin (NIM), or the difference between the yield earned on loans and interest paid on deposits, dropped slightly to 2.86% in June 2026 from 2.89% a year ago.

Domestic NIM at 3% was little changed from the 3.01% reported a year ago. Setty said the bank expects to maintain NIM at 3% during this year, with return on assets of at least 1%. Profit increased despite a drop in non-interest income by 9% year on year. It fell because income from both foreign exchange and trading fell 70% and 32%, respectively, year on year. Fee income, however, increased 21%, led by loan processing charges and commission from government business.

Provisions on non-performing assets (NPAs) also fell 32% reflecting the improvement in the bank's assets quality. Gross NPA ratio was at 1.47%, compared with 1.83% a year ago and was the lowest in two decades, Setty said.

The SBI stock, which climbed to the day's high of ₹1,124 apiece, closed 1.1% higher at ₹1,097 on the NSE. The Nifty, meanwhile, lost 0.3%.