SBI shares fall ahead of earnings NPAs eyed

State Bank of India (SBI) shares fell 4.3 per cent on Thursday, its biggest single-day percentage fall since June 18, on concerns the country’s biggest lender would report disappointing earnings tomorrow.

Concerns over asset quality, which could put pressure on profitability due to higher loan loss provisioning, has made investors wary as public sector lenders such as Punjab National Bank and Union Bank have also announced increased provisioning due to a rise in non-performing assets.

SBI shares closed down Rs 89.15 to Rs 1,971.95 on the Bombay Stock Exchange (BSE). It was the second-worst performer after Bharti Airtel among the 30 Sensex stocks. The Sensex on Thursday ended at 17,560.87, down 39.69 points over yesterday’s close.

Market participants are worried that SBI would report an increase in non-performing loans for the quarter ended June 30.

Gross non-performing assets of SBI was a staggering Rs 39,676 crore at the end of March representing a increase of more than Rs 14,000 crore in one year. Though the SBI management had assured that non-performing assets (NPAs) have peaked, analysts expect trouble from restructured assets to persist.

“We reiterate our view of asset quality concerns resurfacing after a muted performance in the previous quarter, with a weak macro-economic environment and higher delinquencies tapering down growth going ahead,” said brokerage house Nirmal Bang in a report. The broking firm has maintained sell rating on the stock.

Though the Street expects SBI to more than double its net profit on an year-on-year basis – to around Rs 600 crore, but that is due to lower base.

During the first quarter of the previous financial year, SBI posted a profit of Rs 1,584 crore, which was lower by 46 per cent year-on-year due to higher investment depreciation and loan loss provisioning.

“Slippages would remain high, given the challenging macro environment. However, higher upgrades and recoveries should result in lower net slippages and lower increase in GNPAs,” Motilal Oswal said in a report.

According to estimates, SBI is expected to register a loan growth of 16 per cent while margins are likely to stay healthy, though some decline sequentially would be seen due to fall in yield on advances and aggressive reduction of interest rates on some categories.