India's largest lender State Bank of India's September quarter profit may get impacted by one-off deferred tax assets (DTA) adjustment, but the net interest income and loan growth could be more than 10 percent compared to year-ago, according to brokerages.
The stock fell more than 11 percent year-to-date (Y2D), underperforming benchmark index Nifty50 (up nearly 7 percent) and Nifty Bank (up 8 percent). It corrected 27 percent since the start of July amid asset quality concerns.
The profit in Q2 is likely to grow in the range of 60-95 percent year-on-year (YoY) on lower provisions and gains from stake sale in SBI Life Insurance, but may get impacted by DTA adjustment.
"Sale of shares in SBI Life has led to Rs 3,000 crore of gains which will mitigate DTA markdown impact which we assume will be spread over three quarters," said Prabhudas Lilladher which expected net interest income to increase 12 percent and pre-provision operating profit to rise 24 percent YoY.
Motilal Oswal, which has buy call on the stock, expects the loan growth of 13 percent YoY, led by growth in retail book and deposit growth at 8 percent YoY. NII is expected to increase by 12 percent YoY due to lower interest reversals and stable margins, according to the brokerage.
Asset quality is the key thing to watch out for during the quarter as most analysts expect slippages to fall to around Rs 11,000-12,000 crore from Rs 16,995 crore seen in June quarter. Non-performing assets could also see some improvement sequentially due to recovery from NPAs or write-offs.
"Stress addition is likely to come in at 2.2 percent levels, as we believe that most of the stress has been recorded in previous quarters. Developments on the IBC-related accounts and resolution of power assets remain a key monitorable," said Motilal Oswal which expected gross NPA at 7 percent (against 7.5 percent QoQ) and net NPAs at 2.8 percent (against 3.1 percent QoQ).
The market will also closely watch commentary on telecom exposure as the Supreme Court has rejected the telecom companies' definition of Adjusted Gross Revenue (AGR). The bank has exposure of around Rs 40,000-50,000 crore to telecom space.
Other key issues to watch out for would be updates on the retail, SME and agri slippages, recoveries from the resolution of NCLT accounts, and outlook on power assets and macro developments on asset quality.
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