SBI Q1 Results Preview: Soft Margins May Weigh, But Asset Quality Seen Firm
Most brokerages expect the NIM to contract sequentially due to the impact of falling yields on advances, coupled with a lag in repricing of deposit costs.
State Bank of India is likely to report a tepid operating performance for the April-June quarter as analysts anticipate margin compression and seasonally weaker fee income to dent profits, even as asset quality remains stable. The bank is scheduled to report its Q1 earnings on Friday.
The country’s largest lender is expected to post a standalone net profit of Rs 16,964 crore, down 0.4% on year, according to a poll by Bloomberg. During the quarter ended March, the bank’s bottomline was at Rs 18,643 crore.
This is on the back of lower profitability with net interest income seen at Rs 42,430 crore, down over 3% on year. In the March quarter, NII was at Rs 42,775 crore. Consequently, NIM is seen at 2.85%, lower than 3.15% in the quarter ago.
Most brokerages expect the NIM to contract sequentially due to the impact of falling yields on advances, coupled with a lag in repricing of deposit costs.
State Bank of India Q1 FY26 Estimates (Standalone, YoY)
Net profit seen declining by 0.4% to Rs 16,964 crore
NII estimated to fall by over 3% to Rs 42,430 crore
NIM is seen at 2.85%, lower than 3.15% QoQ
Nomura expects NIMs to drop by about 13 basis points on quarter, while Systematix Institutional Equities and Prabhudas Lilladher also see marginal contraction in spreads.
Kotak Institutional Equities expects SBI’s operating profit to decline by around 8% on-year, weighed down by flat NII, despite double-digit credit growth. The pressure is attributed to higher funding costs and limited pass-through of past rate cuts. However, lower staff costs and a boost from treasury income are expected to provide some cushion.
YES Securities also echoed a similar view with slower NII growth relative to loans due to yields falling faster than deposit costs. It expects sequential fee income to be weaker on account of seasonality.
Loan growth is expected to be in the range of 11-13% on-year, but with only marginal gains on a sequential basis at 0.5-to 1%, reflecting the bank’s slower near-term growth trajectory.
Meanwhile, Emkay Global Financial Services and Dolat Capital Market Research see a stable-to-marginally improving earnings profile, supported by treasury gains, lower operating costs, and stable credit costs.
Dolat expects recoveries from a large NPA account transferred to NARCL to support the bottom line. Both brokerages have pegged return on assets at around 1%.
On asset quality, brokerages remain constructive, with slippages are expected to rise sequentially due to seasonally higher agriculture stress, but analysts are not flagging fresh risks from unsecured loans. Most of them are expecting gross NPAs to decline modestly, aided by steady recoveries.
Slippages, particularly from the agriculture book, are likely to be elevated, but provisions may come down as one-off provisioning in Q4 won’t recur, YES Securities said.
Investors will watch out for guidance on margins, return ratios and the pace of loan and deposit growth.
Overall, while SBI is not expected to deliver a strong beat this quarter, most analysts agree that there are no major red flags either, with asset quality seen stable and profitability supported by non-core income and controlled costs.
