State Bank of India (SBI) will announce its third quarter earnings on Friday. Profit for the quarter is expected to jump 45.7 percent year-on-year to Rs 3,254 crore supported by treasury income, fee income and operating profit.
The sharp rise in profitability is also on account of low base in the year-ago period. Profit in Q3FY14 fell 34 percent Y-o-Y to Rs 2,234 crore as provisions jumped 56 percent Y-o-Y to Rs 4,150 crore.
Net interest income, the difference between interest earned and interest expended, may increase 8 percent to Rs 13,654 crore during October-December quarter from Rs 12,640 crore in same quarter last fiscal.
Provisions for bad loans need to be closely watched during the quarter as provisions are expected to be higher, feel analysts.
Asset quality of most of the public sector lenders weakened in Q3 and even provisions spiked up, so that should be watched out for.
Post Q2FY15 earnings, the management had indicated the restructuring pipeline of Rs 3,000 crore. Within restructuring, iron & steel, textiles, power, infra loans (more than 70 percent of restructuring) will be closely watched.
Analysts expect Rs 6,000-7,000 crore of slippages during the quarter, which is almost similar to Q2. In July-September quarter, SBI's slippages fell to Rs 7,700 crore from Rs 9,932 crore Q-o-Q. However, based on other public sector banks' and ICICI Bank’s slippages, SBI slippages could be higher during the quarter.
For instance, PNB slippages were higher in Q3 at Rs 5,200 crore (Rs 3,616 crore in Q2FY15), BoB slippages at Rs 2,852 crore (versus Rs 1,852 crore Q-o-Q) and ICICI Bank slippages in Q3 were Rs 2,279 crore against Rs 1,670 crore on sequential basis.
Within slippages, slippages from restructured loans should be watched out for. In Q2, SBI's slippages from restructured loans were Rs 1,700 crore.
Analysts see pressure on global net interest margin (international + domestic) due to pressure in domestic net interest margin.
Credit growth is expected to continue being muted at around 10 percent.
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