Motilal Oswal has come out with its October-December quarter earnings estimates for the banking sector. The brokerage house expects State Bank of India (SBI) to report a 3.9 percent degrowth quarter-on-quarter (degrowth of 32.8 percent year-on-year) in net profit at Rs 2281.9 crore.
Net interest income is expected to increase by 4 percent Q-o-Q (up 14.2 percent Y-o-Y) to Rs 12739.9 crore, according to Motilal Oswal.
Motilal Oswal's Report on State Bank of India:
Loan growth is expected to be in line with industry at 17 percent+ YoY, while deposit growth is expected to be lower at 15 percent.
Expect NIM to improve by 5bp QoQ, modeled NIM at 3.7 percent, with an increase in 20bp base rate during the quarter. Also, NII is expected to grow by 14 percent YoY.
Fee income growth is expected to be flat YoY. We factor net investment loss of INR 4 billion, compared to a gain of INR2.2 billion in 2QFY14 and INR5.4 billion in 3QFY13, thus dragging earnings.
Macro-economic environment remains challenging and we factor net slippage ratio of 2.1 percent and credit cost of 100bp.
Thus, we expect PAT to decline 33 percent YoY and be at INR22.8 billion.
Excluding subsidiaries, the stock trades at 0.8x FY15E consolidated BV (adjusted for value of insurance) and 7.1x FY15E EPS.
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