Why is SBI stock falling after Q4 results?

SBI shares fell nearly 6% after Q4 results because of the following reasons:

1. Lower profit margins: NIM fell to 2.93% in Q4 from around 3.14% a year ago as the cost of deposits increased faster than the interest charged on the loans.
2. Weak operating profit: Interest income fell while its costs increased.
3. Lower treasury income: This was caused by the rising yields on government bonds. When bond yields rise, the price of current bond prices fall (causing market-to-market loss). This hurts treasury earnings. Treasury earnings mainly come from profits made by buying and selling bonds. When bond yields rise, old bonds with lower interest rates become less attractive, so their market price falls. For example, suppose SBI bought a government bond worth Rs. 100 paying 7% interest. Later, new bonds in the market start offering 8% interest. Now investors will prefer the new 8% bond, so SBI’s old 7% bond may trade at around Rs. 95 instead of ₹100. If SBI sells that bond, it books a loss of Rs. 5. Even if it does not sell immediately, accounting rules may force the bank to show the lower value as a mark-to-market loss. These losses reduce treasury income.

Disclaimer: This content is for informational purposes only and should not be considered investment advice.