State Bank of India hopes to turn the tables in Q1 results on Friday

Country’s largest lender State Bank of India is expected to report signs of lesser asset quality pressures in the first quarter as resolutions to big-ticket stress loans get initiated. However, it may report a drag on profitability due to subdued contribution from treasury amid volatile bond markets.

The interest rate reversals for loans that slip into bad loan category and sluggish credit growth in early months of the next financial year FY19 may adversely impact interest income.

In a review, domestic brokerage Motilal Oswal said loan growth is expected to be muted (over two per cent on quarter over quarter) but pick up slowly from the previous few quarters. The Net Interest Income is expected to be sequentially flat, as interest reversals are expected to keep yields under pressure and loan growth remains sluggish.

Loan growth momentum shall be the key monitorable as the bank had begun gaining lost momentum in Q4FY18, Emkay Research said in a note.

This would be the first comparable quarter for the SBI after associate banks and Bharatiya Mahila Bank were merged with it in April 2017. 

It had posted a net profit of Rs 20.06 billion on net interest income of Rs 176.06 billion and other income of Rs 80.06 billion in April-June 2017 (Q1FY18). For the first year (FY18) after merger it had posted a loss of Rs 65.47 billion on higher provisions for bad loans and diminution in value of treasury portfolio.

SBI chairman Rajnish Kumar, while announcing FY18 results, had said the year gone (Fy18) by was one of despair. The current year (FY19) is one of hope and 2019-20 will be the year of happiness, he said. 

On its Asset quality outlook, Motilal Oswal said stress additions should moderate as most of the stress has been recorded in previous years. The credit cost (amounts set aside for bad loans) to moderate from existing levels with resolution from NCLT referred accounts to provide some relief.