Country's largest lender State Bank of India on June 5 is likely to report healthy growth in March quarter profit, boosted by stake sale in SBI Cards through IPO, recovery from some NPA accounts and lower tax cost.
According to brokerages, the profit growth could be in the range of 600-1,000 percent in Q4 compared to same period last year, while net interest income is likely to be in double digits (YoY) but lower than normal due to moderate growth in advances and steady net interest margin.
"We expect a volatile performance due to recovery in NPLs (Alok Industries and a few smaller ones) as the accounting treatment is likely to be different for each recovery. Loan growth will be subdued at around 7 percent YoY and NIM (core) unchanged QoQ at around 2.9 percent. Reported NIM would have one-off from NPL recovery. Treasury income will include gains on account of stake sale in SBI Cards," said Kotak Institutional Equities which sees 1,007 percent YoY growth in profit and 13.5 percent rise in net interest income in Q4.
According to HDFC Securities, profit is expected to grow 10 percent QoQ, partially aided by the lower tax rate (opted for new tax regime in Q3). "On a YoY basis, PAT is expected to grow 7.3x (on smaller base). NII may grow 12 percent YoY and loan growth is expected to moderate to around 3 percent YoY (7 percent in Q3)."
Provisions are expected to be lower due to recovery though there could be some COVID-19 impact, while asset quality is likely to be stable though slippages may remain elevated a bit.
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"We expect slippages mostly from SME loans, but the pace of accretion to be largely better than Q3. Provisions will be lower YoY due to higher recovery from bad loans, likely to be partly offset by COVID-19 provisions," said Sharekhan which sees 16 percent YoY growth in NII and 962 percent rise in profit.
According to Narnolia, asset quality is be expected to be stable QoQ even though the slippages may be relatively high on account of the stress prevailing in the environment and various sectors like telecom being under pressure.
The stock plunged 50 percent of its value in last one year, while it shed 48 percent year-to-date (2020) and 41 percent in March quarter.
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