SBI Q1: Record profit masks deposit-cost margin squeeze

State Bank of India reported Q1 FY27 net profit Rs 21,121 crore (+10.23% YoY), lowest NPAs in 2+ decades, and NII growth. Market reads asset-quality peak as structural turnaround validated. Reality: NIM at 2.86% masks deposit-cost inflation and margin compression ahead. SBI's loan-to-deposit ratio rose amid 12-15% loan growth guidance; to fund growth, management raises deposit rates faster than lending rates fall, squeezing spreads. Fed rate cuts on Sep 17 aggravate this: lower global rates make term deposits expensive for Indian banks to attract (Singaporean deposits now offer 5%+ risk-free), while RBI may ease rates further, capping lending upside. Profit jumped on NPAs, not spreads. Market misses the asymmetry: cleaning NPAs once is a one-time gain; sustaining margins requires either rate hikes (unlikely, inflation is cooling) or deposit-light business models (SBI's scale is deposit-dependent). Asset quality is peak; margins are at inflection downward. Binary: if RBI cuts rates 25-50bps in next two quarters, deposit costs outpace lending cuts, NIM compresses to 2.70-2.75%, and profit growth stalls at single digits. If loan growth slows to 8-10%, deposits stabilize, NIM holds 2.80-2.85%, and Rs 22,000-24,000 crore profit is sustainable. Entry below Rs 625; target Rs 610. Exit if Q2 NIM falls below 2.82% or deposit-growth guidance cuts. ---DISCLOSURE--- This post is for informational and educational purposes. I do not hold [] at the time of writing. Please do your own research and consult a financial advisor before trading or investing.