SBI Q2: Analysts peg NII growth at 5% YoY, profit may increase up to 100%

SBI Q2: Analysts peg NII growth at 5% YoY, profit may increase up to 100%

Q2 preview: India’s biggest state-owned lender State Bank of India (SBI) is set to report its July-September quarter (Q2FY22) earnings on Wednesday, November 3, and most brokerages are extremely bullish on the lender’s net profit for the quarter.

Domestic brokerage Prabhudas Lilladher, for instance, expects the lender’s profit after tax (PAT) to more-than-double, or surge 102.5 per cent, on year to Rs 9,263.3 crore for the period under review. The same was Rs 4,574.2 crore last year (Q2FY21).

Sequentially, this would be a 42 per cent growth over Rs 6,504-crore PAT clocked in Q1FY22.

Global brokerages, Nomura and HSBC, meanwhile, expect the PAT to jump 87 per cent and 73 per cent year-on-year, respectively, up to Rs 7,901 crore.

On the downside, however, some domestic brokerages project the bank’s net profit at Rs 7,249.8 crore, up 58.5 per cent YoY.

“Healthy net interest margin (NIMs), recovery from DHFL, and lower loan provisioning should lead to strong profitability, partly offset by the hit on NPS/Pension for retired personnel,” said analysts at Emkay Global in their earnings preview report.

They peg the bank’s NIM at 3 per cent for the quarter compared with 2.9 per cent QoQ and 3.1 per cent YoY.

Operationally, though, the lender’s net interest income (NII) is seen rising between 0.6 per cent and 4.6 per cent YoY.

ICICI Direct, for instance, expects NII to be flat YoY at Rs 28,009 crore, with loan growth expected to improve around 8 per cent YoY to Rs 25.8 trillion and 9.5 per cent YoY growth in deposit.

“Non-interest income seen improving to Rs 11,000 crore, up from Rs 8,500 crore in Q1FY21, led by higher fee income due to unlock. NIMs are seen being stable with expectations of firming up,” it said. NII was Rs 28,181.5 crore in Q2FY21 and Rs 27,638.4 crore in Q1FY22.

Those at Nomura said: We expect loan book to remain stable at 6.7 per cent YoY growth. Further, we are building in 6 basis points sequential margin expansion leading to NII growth of 4.6 per cent YoY at Rs 29,471.2 crore.

Asset quality and provisioning

Analysts, on average, expect slippages to moderate, with limited non-performing assets (NPAs) in retail loans. Stress in small and medium enterprises (SME) could be taken out via restructuring, they say.

Nomura forecasts slippages of Rs 4,700 crore (2.8 per cent of prior loans) compared with Rs 6,200 crore (3.6 per cent of prior loans) in Q1FY22.

Provisions, on the other hand, are seen declining to Rs 7,844.7 crore during the quarter from Rs 10,118.3 crore in the year-ago period and Rs 10,052 crore in Q1FY22.

As regards the NPA ratios, Motilal Oswal Financial Services pegs gross NPA (GNPA) ratio at 5.2 per cent while Prabhudas Lilladher pegs the same at 5.83 per cent. The same was 5.32 in Q1FY22 and 5.28 per cent in Q2FY21.

Among key monitorables, analysts will track management commentary around collections, restructuring pool, behavior of ECLGS loans, credit demand, and slippages in the Agri/SME space.

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