Earnings Outlook
SBI Jul-Sept PAT growth seen moderate on high provisions
This story was originally published at 22:38 IST on 6 November 2024
Register to read our real-time news.Informist, Wednesday, Nov. 6, 2024
By Kshipra Petkar
MUMBAI – State Bank of India is expected to report moderate growth in net profit for the quarter ended September due to a rise in provisions, analysts said in their pre-earnings report. The entire banking industry has been increasing provisions or making contingency provisions, particularly for the microfinance segment and the unsecured loan book.
As per the average of estimates from 14 brokerage firms, the net profit of the bank is seen rising 14.3% on year to INR 163.77 billion in Jul-Sept. Sequentially, the bottom line is seen falling nearly 4%. The bottom line is expected to be in the range of INR 128.94 billion-INR 187.12 billion, as per the brokerage estimates. The bank will announce its results on Friday.
On a sequential basis, Axis Securities expects the provisions to rise nearly 14% to INR 39.16 billion for the reporting quarter. In the same quarter a year ago, the bank had provisions of only INR 1.15 billion, the report said. The growth in the retail unsecured book in the case of the largest bank in the country will be in focus, brokerages said.
The asset quality is expected to remain stable in the reporting quarter. The gross non-performing assets ratio of the bank was at 2.21% as of Jun. 30 and the net non-performing asset ratio was at 0.57%. Slippages are expected to be lower in the reporting quarter due to seasonality, a few brokerages said.
"We expect slippages at around 1.5% of loans (lower than 1QFY25, as there is no seasonal stress from PSL [agriculture]). We are likely to see lower recovery and upgrades as well," Kotak Institutional Equities said in its report. In the previous quarter, fresh slippages had increased 3.19% on year to INR 79.03 billion. On a year-on-year basis, however, the slippages could be higher due to the recognition of Mahanagar Telecom Nigam Ltd.'s loan account as a non-performing asset-substandard, Emkay Global said in its report. The state-owned bank has an exposure of INR 3.26 billion to MTNL through the term loan account.
The net interest income of the bank is seen rising 6.3% on year to INR 420.02 billion for the quarter ended September, as per the average of estimates by 14 brokerages. Sequentially, the net interest income is seen rising 2.1%.
"We are building 9% yoy NII (net interest income) growth on the back of 14% on year loan growth. We are building NIM (net interest margin) to decline nearly 10 bps (basis points) on quarter, mostly led by slippages (priority sector lending loans) and higher cost of funds," Kotak Institutional Equities said in the pre-earnings report. SBI's net interest margin for Jul-Sept stood at 3.35% in Apr-Jun. SBI's former chairman Dinesh Khara had said the bank may be able to operate at margins in the range of 3.2-3.4%.
The growth in advances and deposits is expected to be healthy in the reporting quarter, brokerage reports said. The loan book is seen rising 14-15% on year, as per estimates by brokerages. "The increase in the corporate loan book will be the main driver of credit growth," KR Choksey said in its pre-earnings report. The corporate loan book was up 15.9% on year at INR 11.39 trillion as of Jun. 30.
In the past few months, SBI Chairman C.S. Setty has been emphasising the need to grow current account, savings account deposits and to come up with innovative deposits. Total deposits for the bank increased 8.2% on year to INR 49.02 trillion as of Jun. 30.
The bank's commentary on margins, unsecured loan book and its capital raising plans for the reporting quarter will be in focus. On Wednesday, shares of the bank closed 0.66% higher at INR 854.80 on the National Stock Exchange.
Following are the Jul-Sept earnings estimates for State Bank of India, in INR million, based on reports from 14 brokerages:
| BROKERAGE NAME | NET INTEREST INCOME | Net Profit |
| Anand Rathi Share and Stock Brokers Ltd | 423,682.00 | 183,683.00 |
| Antique Stock Broking Ltd | 432,742.00 | 160,583.00 |
| Axis Securities Ltd | 414,270.00 | 160,740.00 |
| Dolat Capital Market Pvt Ltd | 413,625.00 | 150,228.00 |
| Elara Securities (India) Pvt Ltd | 419,404.00 | 171,204.00 |
| Emkay Global Financial Services Ltd | 417,631.00 | 170,060.00 |
| Kotak Institutional Equities | 409,433.00 | 128,936.00 |
| KR Choksey Research | 425,743.00 | 158,287.00 |
| Motilal Oswal Financial Services Ltd | 416,034.00 | 164,057.00 |
| Nirmal Bang Equities Pvt Ltd | 427,177.00 | 172,403.00 |
| Nomura Equity Research | 419,600.00 | 168,200.00 |
| Prabhudas Lilladher Pvt Ltd | 423,624.00 | 156,038.00 |
| Sharekhan Ltd | 417,220.00 | 161,190.00 |
| YES Securities (India) Ltd | 420,128.00 | 187,117.00 |
| Average | 420,022.36 | 163,766.14 |
End
Edited by Tanima Banerjee
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