Country's biggest lender State Bank of India (SBI) will announce its second quarter (July-September) earnings on Wednesday. Asset quality is the key to watch out for as analysts expect some pressure on asset quality to persist in the quarter.
Even new chairperson Arundhati Bhattacharya on September 24 said there was a concern on asset quality, hence her outlook is the key concern for analysts.
Net slippages are expected to decline Q-o-Q due to higher recoveries or upgrades (led by agri) during second quarter, but higher restructuring will continue into Q2, feel analysts.
Analysts are also worried that because of management change it may be a quarter of kitchen sinking. In Q4FY11, when Pratip Chaudhuri took the charge from OP Bhatt, profit after tax sank 99 percent to Rs 20.9 crore as provisions increased 77 percent Y-o-Y to Rs 4,157 crore accompanied with a 56 basis points sequential drop in net interest margin to 3.04 percent. He cleaned up all the liabilities on the books like pensions, teaser rate loan provisions.
According to a CNBC-TV18 poll, profit after tax is likely to decline 27 percent year-on-year to Rs 2,675 crore while net interest income (the difference between interest earned and interest expended) may increase 8 percent Y-o-Y to Rs 11,861 crore in three-month period ended September 2013.
Analysts feel net interest income may be impacted by net interest margin compression while the profitability will be largely depend on provisions.
The bank may record a net investment loss of Rs 100 crore during September quarter as against gain of Rs 670 crore in June quarter and Rs 490 crore in a year ago period.
Net interest margin is expected to decline 10 basis points sequentially. SBI had maintained guidance of domestic net interest margin at 3.5 percent to 3.6 percent for the seccond quarter as against 3.44 percent reported in first quarter.
Loan growth is expected to be strong at around 20 percent year-on-year while deposit growth may be lower at 14 percent in the quarter gone by. The bank had stated that credit growth in Q2 will be strong at 20-21 percent led by corporate and retail.
Meanwhile, state-controlled lender, on October 8, cut bulk deposit rates for 7-60 days by 50 basis points while the bank hiked base rates by 10 bps to 9.8 percent on September 19 and by 20 basis points to 10 percent on November 6.
The stock on Tuesday closed at Rs 1,675.45 apiece on the BSE, down 1.73 percent from previous close.