India's largest lender - the State Bank of India (SBI) is likely to report 12 percent year-on-year fall in its fourth quarter (January – March, FY13) net profit to Rs 3,568 crore on higher provisions against restructured loans and wage revisions. Net interest income or the difference between interest earned and paid out, is expected to fall marginally 2 percent y-o-y to Rs 11,510 crore, according to analysts estimate by CNBC TV18.
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"Credit quality concerns on the bank has pleauted but it will take a few more quarters to improve things," said Vaibhav Agarwal, vice president research, Angel Broking.
"SBI would see improvement on net slippages on the back of strong recoveries. Net slippages were in the range of Rs 4,000 – 5,000 crore. In Q4, it may come down to Rs 2,000 – 3,000 crore. However, restructured loans and provisions would dent its profit margin, although it will be compensated by higher other income and trading gains," he said adding that the stock may increase 10 percent in the next one year.
If a borrower feels stress in repaying loans, a bank relaxes its original terms and conditions of loan agreement. In banking parlance, it is called loan restructuring. SBI is likely to report an incremental restructured loans between Rs 7,000 and Rs 8,000 crore.
Loans are expected to expand by 18 – 20 percent y-o-y while deposits would grow around 14 percent y-o-y. Net interest margin may contract by 10 basis points. In October – December quarter, gross loans increased more than 16 percent y-o-y to to Rs.10.10 lakh crore. The bank had reported a marginal rise of 4 percent y-o-y to Rs 3,396 crore during that quarter.
"During the fourth quarter, the bank tried to improve its recoveries firing on all cylinders. Each centres was given specific target. While some may have fallen short of achieving targets by a thin margin, the overall recoveries have added to our profit margin," a senior official in charge of recovery operations told moneycontrol.com on condition of anonymity.
Since last one year, SBI shares rose 22 percent as against more than 40 percent rise in Bank Nifty – the broader index for banking stocks. In terms of valuation, SBI is considered a little more expensive than that of other PSU peers like PNB, analysts said.