State Bank of India, the country's largest lender, is expected to report a strong profit for the quarter ended December 2018, driven by operating income and NII. Lower provisions and higher treasury income could also support the bottomline.
Overall, brokerages expect profit in the range of Rs 2,000-4,000 crore for the quarter against a loss of Rs 2,416 crore in the same period last year.
Net interest income, the difference between interest earned and interest expended, may grow in the range of 10-20 percent on expected loan growth of 10-15 percent and likely improvement in margin.
"We expect loan growth to improve (but still below system average), with support from the retail portfolio and opportunistic corporate growth," said Edelweiss Securities. Kotak said it expects loan growth at around 14 percent YoY and NIM to increase 10 bps QoQ to around 2.8 percent.
Margins are showing improving trend and the bank should have a Q4 exit NIM of 3 percent, Emkay said.
Overall brokerages said pre-provisioning profit growth could be in the range of 20-28 percent for the quarter.
"Operational should see improvement on NII from steady margins, better treasury gains and control on opex," Prabhudas Lilladher said.
Brokerages said asset quality could be stable with lower slippages sequentially.
Asset quality should be stable as slippages would be largely similar QoQ and as there are not too large recoveries, said Prabhudas Lilladher that expects gross NPA at 9.39 percent for the quarter against 9.95 percent in previous quarter.
Edelweiss Securities also said incremental stress is likely to be contained and slippages anticipated to be lower (impact of exposure to IL&FS needs to be seen).
"Slippages to decline to <2.5 percent as recognition of bad loans is largely complete while gross NPLs could decline with (1) further resolution in power and steel exposures and (2) write-off of bad loans," Kotak said, adding, however, provisions would be high due to ageing of NPLs.
On the corporate front, Jet Airways and IL&FS remain stressed for the bank. Bank expects Essar Steel, Bhushan Power and Prayagraj Power to be resolved in Q4.