Kingfisher stake sale, fewer provisions to drive SBI's Q1 profit: Analysts

Prabhudas Lilladher builds-in recovery from Kingfisher loans at Rs 20 crore

The country’s largest state-owned bank, State Bank of India (SBI), could report a healthy set of numbers for April-June quarter of FY22 (Q1FY22) on Wednesday, August 4, supported by recovery from United Breweries Group’s stake sale and lower interest income reversals, say analysts. They are pencilling-in a year-on-year rise in net profit between 33 per cent and 63 per cent.

Analysts at Emkay Global, for instance, peg the lender’s net profit at Rs 6,840.6 crore, up 63 per cent YoY from Rs 4,189.4 crore reported in the same quarter last year, on the back of healthy net interest margin (NIMs) due to absence of interest waiver, recovery from UB group stake sale, and contained credit cost. Sequentially, it would mean a 6 per cent growth over Rs 6,450.7 crore-profit clocked in Q4FY21.

However, at the extreme ends of expectations, Nomura sees PAT swelling by 85 per cent YoY at Rs 7,757.3 crore while Centrum Broking pegs the PAT at Rs 2,961.5 crore - 29 per cent YoY drop.

The profitability, analysts say, will be backed by around 10-12 per cent YoY increase in net interest income (NII) on the back of around 5-8 per cent yearly expansion in loan book and up to 9 per cent yearly growth in deposits.

Motilal Oswal Financial Services sees the bank’s loan book at Rs 24.7 trillion in the quarter under review, up 7.4 per cent from Rs 23 trillion reported in Q1FY21. Deposits, on the other hand, are seen at Rs 37.2 trillion, up 8.8 per cent from Rs 34.2 trillion in the year-ago period.

This, in turn, may result in a NII – the difference between interest received on loans extended and interest paid on deposits – of Rs 28,750 crore; a growth of 8 per cent on year. The income was Rs 26,641.6 crore last year, and Rs 27,067 crore in the March quarter of FY21. NIM is seen unchanged at 3 per cent.

As regards operating profit, analysts see the gain largely unchanged around Rs 18,200 crore. On the downside, Nomura has a cautious estimate of Rs 16,385 crore (down 9 per cent YoY) while HSBC sees an upside of 15.5 per cent YoY at Rs 19,086.6 crore. PPOP was Rs 18,061.1 crore in Q1FY21 and Rs 19,700 crore in Q4FY21.

Asset quality and key monitorables

Prabhudas Lilladher projects slippages at Rs 9,200 crore for the period under study, higher than Rs 5,000 crore reported in Q4FY21, on likely deterioration in asset quality in the Agri/SME segment. It, however, builds-in recovery from Kingfisher loans worth Rs 20 crore. The brokerage expects provisions in the quarter to slide 20.5 per cent YoY and 10 per cent QoQ to Rs 9,941 crore.

ICICI Securities, on the other hand, expects the same at Rs 8,200 crore relative to Rs 11,051 crore sequentially. In the year-ago period, the bank had set aside provisions worth Rs 12,501.3 crore.  Gross NPA ratio is seen unchanged sequentially at 5 per cent and down 40 basis points from the previous year quarter.

Nomura says the management’s commentary around collections, restructuring pool, behaviour of Emergency Credit Line Guarantee Scheme (ECLGS) loans, and credit demand will be the key to track.