The country's largest lender State Bank of India is expected to report a healthy profit in the June quarter over lower provisioning, asset quality improvement, and higher treasury income and loan growth, brokerages said. The bank will announce its quarterly earnings on August 2.
The profit is expected to be in the range of Rs 2,500-6,000 crore for the quarter, according to the brokerages considered.
SBI had posted a loss of Rs 4,875.9 crore in the corresponding quarter of the last fiscal and a profit of Rs 838.4 crore in March quarter.
According to brokerages, loan and NII growth could be in double digits with lower slippages, but other income or non-interest income may be quite strong.
"We expect loan growth of 17 percent YoY, led by growth in retail books and portfolio buyouts. NII is expected to increase by 10 percent YoY due to lower interest reversals and better recoveries from written off accounts. Non-interest income is expected to remain strong at 38 percent YoY on account of an improvement in the treasury performance and fee income," said Motilal Oswal which has a buy call on the stock and expects profit to be at Rs 4,820 crore for June quarter.
The brokerage further said that stress addition is likely to moderate to 1.7 percent, as it believes that most of the stress has been recorded in previous quarters.
ICICI direct also said that as slippages are expected to moderate to around Rs 6,000 crore, NPA overall provisions would be seen moderating to Rs 9,000 crore from previous highs, and investment provisions write back can lead to overall provisions down to Rs 4,990 crore.
Provisions for bad loans stood at Rs 19,228.3 crore in the June quarter 2018 and Rs 16,501.9 crore in the March quarter 2019.
Brokerages feel that with the expected fall in slippages, asset quality should improve.
According to Prabhudas Lilladher, gross non-performing assets as a percentage of gross advances may fall to 7.23 percent in Q1FY20, down from 7.53 percent in Q4FY19.
The key issues to watch out for would be updates on the retail, SME and agri slippages; recoveries from the resolution of NCLT accounts; outlook on power assets and macro developments on asset quality.
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