RAROC profile and corporate credit pricing model derived from Pillar 3 disclosures.
State Bank of India is a India-based bank with approximately EUR 12.4tn of corporate credit exposure (EAD) under the Standardised approach to credit risk capital. The numbers below come directly from State Bank of India's most recent Pillar 3 CR6 regulatory filings and are used to model how this bank prices corporate credit facilities.
| Parameter | Value | What it means |
|---|---|---|
| IRB approach | Standardised | How the bank computes risk-weighted assets |
| Cost-to-income ratio | 54.0% | Operating cost share of net revenue |
| Effective tax rate | 25.0% | Applied to RAROC numerator after EL and funding |
| Average corporate PD | 1.80% | EAD-weighted probability of default |
| Avg LGD (unsecured) | 45.0% | Loss share if borrower defaults, no collateral |
| Avg LGD (secured) | 25.0% | Loss share with eligible collateral |
| Funding spread | 20bp | Bank's wholesale funding cost above risk-free |
| Corporate EAD | EUR 12.4tn | Total exposure at default to corporates |
On a representative BBB+ rated, 5-year term loan of EUR 25M at 150bp spread with a 20bp commitment fee, State Bank of India would generate an estimated RAROC of 6.87% against a typical 12% bank hurdle rate. To hit that hurdle on this exact deal, the bank would need a minimum spread of 262bp. This deal is significantly below target — the bank would either reprice it or decline.
| Component | Value |
|---|---|
| Annual revenue (spread + fees) | EUR 385,000 |
| Operating cost | EUR 154,000 |
| Expected loss (PD × LGD × EAD) | EUR 28,750 |
| Capital required (FPE) | EUR 2,451,320 |
| RAROC (after tax) | 6.87% |
| Min spread to hit 12% RAROC | 262bp |
Out of 59 banks in the OpenRAROC dataset, State Bank of India ranks #47 by RAROC on this sample deal.
| Rank | Bank | Country | RAROC | Min spread |
|---|---|---|---|---|
| 1 | Qatar National Bank | Qatar | 9.00% | 203bp |
| 2 | DBS Group | Singapore | 8.18% | 224bp |
| 3 | JP Morgan | United States | 8.12% | 231bp |
| 4 | ICBC | China | 8.06% | 233bp |
| 5 | China Construction Bank | China | 8.06% | 233bp |
| 46 | Westpac | Australia | 6.88% | 271bp |
| 47 | State Bank of India | India | 6.87% | 262bp |
| 48 | ANZ Group | Australia | 6.82% | 271bp |
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