SBI Q4 Preview: PAT may surge 66% YoY on strong loan book, NII growth

A double-digit growth in the loan book and interest income, coupled with steady profitability and lower provisions is likely to help State Bank of India put up a stellar show in the March quarter.

The country’s largest lender is seen reporting a sharp 66% year-on-year (YoY) growth in net profit for the March quarter to Rs 15,100 crore, according to the average of estimates by 9 brokerages. Net interest income, the difference between interest earned and interest expended, is seen rising 26% YoY to Rs 39,352 crore.

The state-owned lender will release its earnings on Thursday. Lower slippages and better recoveries are likely to aid the improvement in the asset quality of the bank. SBI has been bringing down bad loans on its books consistently over the past 4-5 years.

In the December quarter, the lender’s gross bad loans fell below the Rs 1-trillion mark for the first time since 2016. From a stock perspective, SBI has been the preferred pick for most brokerages in the public sector space. In the last 1 year, the stock has outperformed Nifty50 by nearly 14%. Despite the stellar gains of 29% in the last 1 year, the stock is trading at 11 times P/E on a 12-month trailing basis, lower than the industry average.

Here’s summarising analysts’ expectations from the lender in the March quarter:

Axis Securities
Expect strong advances growth of 16/5% YoY/QoQ, along with a marginal uptick of 5-7 bps in net interest margin (NIM) to support NII growth. Pre-provision operating profit (PPoP) growth expected to remain healthy, supported by flattish operating expense ratios. Credit costs to remain stable sequentially, thus aiding the bottom-line. No chunky slippages expected during the quarter, asset quality improvement
to continue. Key monitorables will be asset quality outlook and loan book traction

Emkay Global Financial
Some softness in NIMs and higher operating expenses, including PLI, are expected to soften profit sequentially. Moderate slippages and better recoveries are likely to drive down NPAs.

ICICIdirect
Credit growth is expected at 15% YoY to Rs 31,591 billion, basing out post strong 18-20% growth in the last two quarters. Estimate deposit growth at 9.6% YoY, with cost of funds stabilising. Overall, NII growth expected to stay strong at 23% YoY to Rs 38,500 crore. Expect slippages at Rs 4,000 crore with overall NPA provisions seen at Rs 45 billion. Expect strong profit growth trend to continue with a surge of 65% YoY and 6.4% QoQ to Rs 15,114 crore.

Prabhudas Lilladher
SBI should continue to report better NII growth of 29.5% YoY and 6.1% QoQ, while loan growth would be higher than industry at 4.7% QoQ. Expect slippages to go up, however, credit cost to be below 1%. Margin may improve 6-7 bps sequentially.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)