State Bank of India (SBI) will release its June quarter scorecard on August 4 and it may show some signs of weakness in business growth even though asset quality is likely to be largely stable, say experts.
Brokerage firm Motilal Oswal Financial Services expects SBI's credit cost to remain high for the June quarter to keep the balance sheet resilient.
While business growth may have moderated on a quarter-on-quarter (QoQ) basis, restructuring book and impact on asset quality will be the key to assessing the impact of the second wave of COVID-19, Motilal Oswal said.
The brokerage firm expects a 39.1 percent year-on-year (YoY) rise in SBI's Q1FY22 net profit, while operating profit may climb 6.5 percent YoY.
Net interest income (NII), the difference between the interest income earned from lending activities and the interest paid to depositors, may rise 7.9 percent YoY and margins may remain stable at about 2.9 percent, said Motilal Oswal.
The estimates of Kotak Institutional Equities show an 8 percent YoY rise in NII, while profit may surge 79.1 percent YoY.
"We expect an operating profit growth of 17 percent YoY, adjusted for one-off treasury gains of stake-sale in Q1FY21. We are building 8 percent NII growth on the back of subdued loan growth at nearly 4 percent YoY. NIM (core) may remain unchanged QoQ at about 3.1 percent. Income from written-off loans and low base in fee income will drive non-interest income growth," Kotak said.
Also read: SBI waives processing fees on home loans till August 31
The brokerage firm expects slippages at 2.5 percent of the loans, mostly driven by agriculture (seasonal slippages).
"We expect a solid positive commentary on the bank's retail and corporate loan book from an asset quality perspective," Kotak said.
Also read: SBI Yono Lite app: Check new feature for making online banking safe
Edelweiss Securities foresees signs of weakness in business momentum due to systemic slowdown. "Asset quality is likely to remain steady in the quarter (barring some challenges in agriculture book, more of seasonal in nature), however, recoveries would be limited. Key monitorable will be loan book under restructuring and performance of ECLGS pool," it said.
Disclaimer: The above report is compiled from information available on public platforms. Moneycontrol advises users to check with certified experts before taking any investment decisions.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
