SBI Q1 preview: Analysts predict double-digit loan growth, drop in net NPA

The country’s largest lender State Bank of India (SBI) is expected to see a turnaround performance in the June quarter of financial year 2019-20 when it reports numbers on Friday, August 2. Analysts peg the net profit at Rs 5,934.5 crore as compared to a net loss of Rs 4,875.9 crore in the corresponding quarter of the previous fiscal (Q1FY19).

On a sequential basis, SBI clocked a profit after tax (PAT) of Rs 838.4 in the March 2019 quarter (Q4FY19). Contained slippages and double digit loan growth could further aid profitability, they say.

Here is what leading brokerages expect:

ICICI Securities

Analysts at ICICI Securities expect a 12 per cent and 7.5 per cent YoY growth in the bank’s loan and deposit figures respectively in the recently concluded quarter. “As slippages are expected to moderate to Rs 6,000 crore, non-performing assets (NPA) and overall provisions are seen moderating to Rs 9,000 crore from previous highs,” they said in a results preview note. They peg the PAT at Rs 5,935 crore for Q1FY20.

Edelweiss Securities

The brokerage expects retail and corporate credit portfolio to aid loan growth in the June quarter. Slippages, they feel, will moderate in Q1. They expect a 146.5 per cent sequential rise in the bank’s PAT at Rs 2,066.7 crore along with a decline of 14.6 per cent QoQ in pre-provision profit at Rs 14,452.5 crore.

Phillip Capital
 

Analysts at Phillip Capital, too, remain positive on the bank’s loan book and say that the same could lead to improved net interest income (NII).

“Strong loan growth book along with stable net interest margin (NIMs) to drive NII… Slippages would mainly come from the watchlist,” they wrote in their result preview note.   

They peg the NII at Rs 22,888.4 crore, up 5 per cent YoY, from Rs 21,798.4 earned in the same quarter of the previous fiscal. It could, however, decline 0.3 per cent sequentially from Rs 22,953.8 crore reported in Q4FY19. That apart, slippages are expected at Rs 7,000 crore, down 51 per cent YoY, from Rs 14,349 crore in Q1FY19 and 12 per cent from Rs 7,961 crore reported in Q4FY19.

Motilal Oswal Financial Services

The brokerage expects a significant improvement in the state lender’s asset quality. It expects the gross and net non-performing assets to decline YoY by up to 23 per cent and 37 per cent respectively.

“Stress addition is likely to moderate to 1.7 per cent, as we believe that most of the stress has been recorded in the previous quarters,” analysts say.

They project the GNPA to come in at Rs 1.65 lakh crore, down from Rs 2.13 lakh crore reported in Q1FY19 and, Rs 1.73 lakh crore in Q4FY19. Further, the NNPA is estimated at Rs 62,410 crore, down from Rs 99,240 crore in the June quarter of FY19, and Rs 65,890 crore reported in Q4FY19.

The GNPA ratio is seen at 7.2 per cent while NNPA ratio is expected to come in at 2.8 per cent. The former was 10.7 per cent, and the latter was 5.3 per cent in the year ago period.

Prabhudas Lilladher

Analysts at Prabhudas Lilladher project the bank’s NII to grow nearly 10 per cent YoY and 4.1 per cent QoQ to Rs 23,905 crore. They also estimate the bank to clock a PAT of Rs 2,937.8 crore.

“SBI could see sharp earnings recovery in this quarter, while slippages could be around Rs 8,000-8,200 crore. The credit cost of 200 basis points (BPS) (annualized) should improve the provision coverage ratio (PCR) to 70 per cent but also help in higher write-off,” they wrote in an earnings preview note.