SBI Q2 Preview: Profit Growth Seen Restrained Amid Continued Pressure On NIM
State Bank of India's net profit may have declined sequentially in the July-Septebmer quarter due to a potential decrease in net interest margin and rising operating expenses, according to analysts.
The lender is set to announce it's quarterly results on Saturday.
Analysts polled by Bloomberg estimate a standalone net profit of Rs 14,307 crore, implying a 7.8% uptick from last year's Rs 13,265 crore. On a sequential basis, the profits are to decline by 15.3%.
Bloomberg Consensus Estimates (Standalone)
Net income estimate: Rs 14,307 crore
Net interest income estimate: 38,926 crore
Gross non-performing assets estimate 2.69%
Several banks have reported a decrease in net interest margin for the July–September period as the cost of funds has surpassed loan re-pricing. “We are building NIM to decline of around 10 basis points quarter-on-quarter, but we do see a possibility of stable performance given the structure of the loan book and the negligible need for deposits to fund this growth,” according to Kotak Institutional Equities.
ICICI Securities concurred.
The bank's domestic net interest margin fell by 11 basis points sequentially in the first quarter to 3.47%.
ICICI Securities sees a 10% year-on-year rise in net interest income, along with higher operational expenses on a sequential basis, as they believe the bank could step up on wage bi-partite provisions while lower treasury gains would limit other income growth.
Consequently, cost-to-income ratios are expected to shadow margin trends and could increase by 1 percentage point per quarter for SBI to 51%, according to BNP Paribas.
Most brokerages anticipate an improvement in the bank's asset quality in July-September. Asset quality is expected to improve further, supported by a low-stress asset pool, according to Motilal Oswal Financial Services.
“We expect slippages at about 1.5% of loans (lower impact from PSL in 2QFY24) as the overall loans is holding up well. We are likely to see lower recovery and upgrades as well,” Kotak Institutional Equities said.
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