Key things to watch for SBI Q4, net seen at Rs 3,580cr

India's largest lender State Bank of India (SBI) is expected to report a net profit of Rs 3,580 crore for the fourth quarter of FY12 as against Rs 21 crore in the same period a year ago period, according to CNBC-TV18 poll. Even though it looks like a phenomenal growth in its net level, analysts tracking the bank refuse to draw any such year-on-year comparison.

"In this quarter, it is not justified to compare net profit year-on-year basis," Bhavesh Kanani, banking analyst at Centrum broking told Moneycontrol.com.

"In Q4, FY11; net profit nosedived nearly 100% to Rs 21 crore on higher provisions. It was the time when the current chairman (Pratip Chaudhuri) had just taken charge as the new SBI boss. The lender had to provide for huge pool of bad loans to clean its book while setting aside funds for gratuity payments," he said.

Net interest income or the difference betwen interest earned and paid out, is likely to grow 46% y-o-y to Rs 11,777 crore. Loan book would expand by 16-18% y-o-y while deposits should rise by 14%. The Reserve Bank of India had projected an industry credit growth of 16. It was at 14% for deposits.

A section of analysts however believe, the bank's net interest margin (NIM) could contract a bit on account of reversal of interest income. If actual interest payment does not happen, the bank has to do a reverse book entry as it is already shown in the balance sheet.

Key factors to be watched for SBI's Q4, FY12:

• Asset quality (i.e. the level of non-peforming assets)
• Restructuring (the process when a borrower is unable to make timely payments and approaches the lender to dilute its original terms of the loan)
• Slippages (when a loan account slips to sub-standard asset that suggests non-receipt of repayment for 90 days)
• Losses in investment (equity) portfolio

The poll suggests that slippages would remain high but improvement in upgrades and recoveries should result in lower net slippages and contain NPAs.

"Despite all concern, the lender can surprise the market with some positives in its Q4 numbers. Major asset quality concerns are almost over. Moreover, it does not have much exposure to state electricity boards (SEBs), which are mostly going for restrcuturing," said Nilanjan Karfa, banking analysts at Bric Securities.

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saikat.das@network18online.com