Q3 preview: 3 reasons why SBI may report weak results in December quarter

SBI share price: State Bank of India is scheduled to post its Q3FY24 results on Saturday, February 3.

SBI Q3FY24 result preview: Weighed by weak treasury income, higher wages outgo, and margin moderation, State Bank of India (SBI) is expected to post weak set of numbers for the October to December (Q3) quarter of financial year 2023-24 (FY24).

The lender is scheduled to post its Q3FY24 results on Saturday, February 3. 
 

On the bourses, shares of India's largest public sector bank have gained 0.9 per cent on the BSE so far this year. It hit a record high of Rs 660 on December 20, 2023.

 

By comparison, the S&P BSE Sensex has dipped 0.8 per cent thus far in CY24. 
 

Here's what brokerages expect:
 

BNP Paribas

The global brokerage expects modest growth of 6 per cent year-on-year (Y-o-Y) in the lender's net interest income (NII) at Rs 40,345 crore during the quarter under review. On a quarter-on-quarter (Q-o-Q) basis, it would be a 2 per cent rise.
 

NII was Rs 38,068.6 crore in Q3FY23, and Rs 39,500 crore in Q2FY24. 
 

However, a weak operating profit at Rs 21,590 crore (down 14.4 per cent Y-o-Y/up 11.2 per cent Q-o-Q) could lead to a 3.6 per cent Y-o-Y/4.5 per cent Q-o-Q hit on net profit at Rs 13,620 crore. 

Kotak Institutional Equities

The brokerage expects operating profit growth to be decline sharply by 18.3 per cent Y-o-Y to Rs 20,613 crore from Rs 25,219.3 crore earned in Q3FY23. On a Q-o-Q basis, it would be a 6 per cent growth over Rs 19,416.6 crore reported in Q2FY24.
 

It further builds 5 per cent Y-o-Y growth in  NII at Rs 40,220 crore on the back of 14 per cent Y-o-Y loan growth.
 

"We are building net interest margin (NIM) to decline around 7 basis points Q-o-Q/19 bps Y-o-Y, but do see a possibility of stable performance given the structure of loan book and neglibile need for deposits to fund this growth. Operating expenses would be higher due to wage revision related costs (final settlement impact)," it said in its results preview report.
 

Loan-loss provisions, the brokerage notes, may decline 43 per cent Y-o-Y/50 per cent Q-o-Q to Rs 907.4 crore.
 

Against this, net profit is seen slipping 0.1 per cent Y-o-Y/0.9 per cent Q-o-Q to Rs 14,196 crore from Rs 14,205.3 crore and Rs 14,330 crore, respectively.
 

"We expect slippages at 1 per cent of loans (lower impact from priority sector lending in Q2) as the overall loans is holding up well. We are likely to see lower recovery and upgrades as well. Key discussion would be on NIM, RoE, unsecured loans, and CAR for the quarter," it added.

ICICI Securities

Factoring in a sharper 21 per cent Y-o-Y decline in operating profit (Rs 19,884.5 crore), the brokerage expects net profit to slip 8 per cent on year to Rs 13,234.5 crore.
 

PAT was Rs 14,205.3 crore in Q3FY23 and Rs 14,330 crore in Q2FY24. 
 

Advances, it said, could grow 14 per cent Y-o-Y to Rs 34.86 trillion vs Rs 30.58 trillion last year. Sequentially, this would be a 4.2 per cent growth over loan book worth Rs 33.45 trillion.
 

NIM, meanwhile, is pegged at 3.23 per cent vs 3.29 per cent Q-o-Q and 3.5 per cent Y-o-Y.
 

Motilal Oswal Financial Services

The brokerage believes SBI may report higher opex due to increased investment, with earnings expected to decline due to higher wage provision.
 

It sees Q3FY24 opex at Rs 33,930 crore, up 39.5 per cent from Rs 24,320-crore opex in Q3FY23. During Q2FY24, the same was Rs 30,870 crore.
 

Operating profit, therefore, could slide 31 per cent Y-o-Y to Rs 17,410 crore. Net profit, too, may slip 22.4 per cent Y-o-Y to Rs 11,020 crore.
 

Loan growth is pegged at 13.9 per cent Y-o-Y (Rs 34.8 trillion), and deposit is pegged at 14 per cent Y-o-Y (Rs 48 trillion).
 

Gross non-performing asset (GNPA) ratio could improve to 2.4 per cent vs 2.6 per cent Q-o-Q/3.1 per cent Y-o-Y.
 

NNPA is seen flat Q-o-Q at 0.6 per cent. 
 

KRChoksey

It expects loan growth to be around 13.9 per cent Y-o-Y/ 4.1 per cent Q-o-Q, led by higher traction in home loans and improvements in the digital lending segment. 
 

It expects the Xpress credit segment to slow down as a deliberate effort by the Bank to lower the unsecured loans segment.

NII, thus, is expected to see growth of 4.9 per cent Y-o-Y/ 1.1 per cent Q-o-Q (Rs 39,931.1 crore), with NIM declining by 6 bps Q-o-Q.
 

PPOP is expected to decline by 23.3 per cent Y-o-Y/0.3 per cent Q-o-Q to Rs 19,349.2 crore, attributable to the higher expenses on the back of the revision in the wage provisions of the bank. 
 

The cost-to-income ratio, it said, is expected to be around 62 per cent vs 61.4 per cent in Q2FY24 vs 49.1 per cent in Q3FY23. Credit costs remain stable for the quarter, with moderation on the slippage front. 
 

Sharekhan

The brokerage has the most bullish estimates with NII anticipated to rise 6.4 per cent Y-o-Y/2.5 per cent Q-o-Q to Rs 40,493 crore; operating profit change seen at -12.1 per cent Y-o-Y/14.2 per cent Q-o-Q to Rs 22,179 crore; PAT growth at 4.4 per cent Y-o-Y/3.5 per cent Q-o-Q at Rs 14,836 crore.