State Bank of India, the country's largest lender, is expected to see sharp spike in Q1FY21 profitability led by stake sale in life insurance business, but likely additional COVID-19 provisions may limit the growth.
Numbers will be announced on July 31.
The growth in net interest income could be around 10 percent year-on-year for the quarter, with loan growth at around 7 percent and stable net interest margin for the quarter.
"We expect higher focus on NII (13 percent YoY) given the recent cuts in lending yields and deposit rates. Loan growth will be subdued at around 7 percent YoY and NIM (core) unchanged QoQ at around 2.95 percent. Treasury income would include gains on account of stake-sale in SBI Life Insurance," said Kotak Institutional Equities which sees 191 percent YoY growth in profit and 39 percent in pre-provision operating profit (PPoP).
While expecting 185 percent growth in profit YoY and 12.7 percent in NII, Sharekhan also feels loan growth is likely to be near industry levels at around 6 percent YoY with stable NIM (core) due to easing of cost of funds.
Overall, brokerages expect improvement in asset quality on sequential basis with lower slippages than Q4FY20, while provisions could see increase on YoY basis due to COVID-19 but sequentially provisions could be lower.
"We expect slippages mostly from SME loans, but the pace of accretion to be largely better than Q4," said Sharekhan.
Kotak expects slippages at 2 percent of loans mostly from agriculture (seasonal unless under moratorium), SME loans. It expects moratorium ratio to decline further and mostly led by the retail/SME segment.
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ICICI Securities also feels the moratorium of 23 percent is expected to decline in line with peers led by retail & SME segments. "We factor in higher slippages in agri due to seasonality and loan loss provisions of Rs 9,670 crore and overall provisions at Rs 10,360 crore versus Rs 13,495 crore in Q4FY20, which had excess provisions booked. Hence, net profit is likely to grow 100 percent YoY and 31 percent QoQ."
SBI share price corrected 44 percent year-to-date and 9 percent in June quarter amid fear of asset quality concerns after the end of moratorium on August 31.