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Last Updated : Aug 11, 2015 10:51 AM IST | Source: CNBC-TV18

SBI Q1 net seen up 4.5%, slippages may fall; 5:25 rejig key

Profit on yearly basis is likely to be impacted by rise in provisions, subdued other income and higher operating expenses. Analysts expect fee income to rise 10 percent year-on-year but treasury and dividend income may be weak (in Q4FY15, fee income grew by 9.71 percent and dividend income growth was 36.6 percent).

 
 
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State Bank of India's (SBI) first quarter earnings are expected to be subdued like previous quarters. Net profit may increase 4.5 percent year-on-year to Rs 3,500 crore and net interest income is seen rising 10.2 percent to Rs 14,599 crore, according to average of estimates of analysts polled by CNBC-TV18.


Net interest income is the difference between interest earned and interest expended. The country's largest lender will announce its earnings on August 11.


Profit on yearly basis is likely to be impacted by rise in provisions, subdued other income and higher operating expenses. Analysts expect fee income to rise 10 percent year-on-year but treasury and dividend income may be weak (in Q4FY15, fee income grew by 9.71 percent and dividend income growth was 36.6 percent).

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Net interest margin is estimated to decline on sequential basis as SBI had one off other income component due to interest income on IT refund in Q4FY15 and due to impact of 30 basis points lending rate cut by the bank.


Loan growth is expected to (still) be lacklustre due to subdued corporate demand. Estimated loan growth is 8-10 percent for June quarter.


In asset quality, gross non-performing loans (NPA) in Q4FY15 declined on sequential basis for the first time since Q1FY15. Hence, the stability or decline further in NPA may be a positive.


Analysts believe that slippages on a year-on-year basis may decline but may rise sequentially due to seasonality, which is expected to be around Rs 7,000-7,500 crore in Q1FY16 against Rs 4,769 crore in March quarter and Rs 9,932 crore in Q1FY15.


Restructuring may be lower on sequential basis to Rs 3,000 crore during the quarter against Rs 11,885 crore in March quarter.


Key factor in Q1 earnings to watch out for would be 5:25 restructuring (which allows banks to extend long terms loans for 20-25 years and refinance them every 5 or 7 years). SBI pipeline for debt restructuring under 5:25 scheme is expected to be around Rs 6,500 crore. So far, Punjab National Bank restructured loans worth Rs 2,600 crore under this scheme, Union Bank Rs 6,400 crore, Bank of Baroda Rs 4,000-5,000 crore and ICICI Bank less than Rs 1,000 crore for the quarter.


Additionally, in July, sources told CNBC-TV18 that SBI has put up 66 loans worth Rs 4,000 crore for sale to asset reconstruction companies.



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First Published on Aug 10, 2015 12:01 pm
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