SBI to report Q2 result today; here's what leading brokerages expect

Lower growth in net interest income, muted loan growth, an unchanged net interest margin, and decline in operating profit may mark the quarter, say analysts

India’s largest government-owned bank, State Bank of India (SBI), is set to declare its September quarter result (Q2FY21) on Wednesday, November 4, under the chairmanship of Dinesh Khara. Analysts, however, remain divided on the bottom-line figures. Net profit, for instance, may come in anywhere between Rs 2,172.2 crore and Rs 4,676.5 crore, say analysts.

The lender had, during the June quarter of FY21, positively surprised Street with a net profit of Rs 4,189 crore driven by lower provisions and one-time gain from stake sale in SBI Life. Net interest income (NII) during the quarter stood at Rs 26,641 crore.

Now, for the September quarter, analysts at ICICI Securities expect outstanding contingency provisions of Rs 3,000 crore, and a buffer in booking mark-to-market (MTM) gains on treasury portfolio will cushion earnings of some stress recognition.

That said, slower growth in NII, muted loan growth, an unchanged NIM, and decline in operating profit may mark the quarter.

Here’s what to expect:

Nomura

The foreign brokerage expects operating profit to decline by 14 per cent to Rs 15,688.3 crore compared with previous year’s Rs 18,198 crore profit. Sequentially, the figure may slip 13 per cent from Rs 18,061 .1 crore clocked in Q1FY21.

The net profit, however, is seen growing 47 per cent YoY to Rs 4,431 crore from Rs 3,011.7 crore reported in Q2FY20. The PAT may clock a gain of 6 per cent over Rs 4,189.3 crore-net profit logged in the June quarter.

Edelweiss Securities

Analysts at the brokerage have a conservative estimate on the net profit, pegged at Rs 2,117.2 crore, down 30 per cent YoY and 49.5 per cent QoQ. Pre-provision profit, on the other hand, is seen at Rs 17,639.1 crore.

Emkay Global

Healthy treasury gains and lower operating expenses could support operating profit to come in at Rs 16,170.2 crore, although down 11 per cent YoY and 10.5 per cent QoQ. PAT is also seen slipping 11.4 per cent YoY and around 36 per cent QoQ to Rs 2,667.3 crore.

"The bank needs to build higher Covid-19 provisioning buffer and fraud-related provisions. That said, slippages should remain moderate in Q2," the brokerage said in its preview report.

ICICI Securities

Lower tax outgo worth Rs 1,558.8 crore in the recently concluded quarter, compared with Rs 2,048.1 crore tax payment in Q2FY20 could support the PAT to clock a 55 per cent YoY growth to Rs 4,676.5 crore, say analysts at ICICI Securities.

The profit before tax (PBT), on the other hand, is seen at Rs 6,235.4 crore, up 23 per cent from Rs 5,059.8 crore reported in the previous year quarter. Sequentially, it may improve 12 per cent from Rs 5,546.1 crore reported in Q1FY21.

"Industry-wide improvement in collection efficiency will play out for SBI. It has relatively lower vulnerability on asset portfolio as the bank has notably transitioned towards better profile assets, which will finally contain the flow from morat 2.0 pool to restructuring. Moreover, best-in-class deposit rate will help it improve market share and gain balance sheet," it said.

Loan book is seen growing only 1 per cent sequentially and 8 per cent on a yearly basis to Rs 23.21 trillion. Deposits, meanwhile, are pegged at Rs 34.70 million.

Prabhudas Lilladher

Prabhudas Lilladher expects lower rates and slower loan growth to impact NII and NIM during the quarter under review. The NII growth is pegged at Rs 27,163.8 crore, up 10.4 per cent (2 per cent QoQ), while NIM is seen at 2.99 per cent.

Further, the brokerage foresees provisions declining 12.5 per cent YoY to Rs 11,501.2 crore from Rs 13,138.9 crore in Q2FY20. This would be an 8 per cent de-growth from June quarter’s provisions worth Rs 12,501.3 crore.

Gross non-performing asset (GNPA) ratio is seen at 5.31 per cent compared with 7.19 per cent YoY and 5.4 per cent QoQ.

Kotak Institutional Equities

The brokerage has conservative estimate for NII given the recent cuts in lending yields and deposit rates. The income is expected to grow 8 per cent YoY to Rs 26,625 crore, up from Rs 24,600 crore logged in Q2FY20. Sequentially, it would be a decline of 0.1 per cent from Rs 26,641 crore reported in Q1FY21.

Besides, loan growth is seen subdued at 7 per cent YoY while NIM (core) may remain unchanged QoQ at around 3.2 per cent, they said in a preview report

“We expect slippages at 1.6 per cent of loans as the moratorium has now been lifted but the restructuring option would keep this quarter's slippages on the lower side. We wait to see if the bank would further increase its coverage ratio. Focus would be on the quantum of restructured loans; restructuring is likely to be completed by 4QFY21,” it added.