SBI Q4 preview: Analysts see 65-115% YoY PAT growth on lower provisions

SBI Q4 result preview: A healthy net interest income (NII) growth, coupled with healthy recoveries and fewer provisions and aided by low base of the previous year, may help State Bank of India (SBI) to report robust March quarter (Q4FY21) numbers, analysts say. However, given the second wave of Covid-19 in the country, analysts would track the management’s asset quality outlook, growth in loan book, and restructuring trends. India's largest public sector lender is slated to report its Q4 results on Friday, May 21.
 

At the operational level, analysts at Nomura expect the lender’s pre-provision or operating profit to increase 23.5 per cent on year to Rs 22,804.3 crore from Rs 18,465.1 crore reported in the previous year period. On a quarterly basis, the operating profit may grow 31.6 per cent from Rs 17,333.2 crore. 
 

An even better estimate by ICICI Securities pegs the same at Rs 20,408.8 crore, up 30 per cent YoY, while a cautious estimate by Emkay Global sees it just 1 per cent higher than previous year at Rs 18,642.9 crore. 
 

This healthy growth in the profit, analysts say, would be driven by a double digit growth in net interest income (NII). Analysts are baking-in a growth in the interest income anywhere between 22-32 per cent YoY, in the range of Rs 27,731.2 crore to Rs 30,045.5 crore. SBI’s NII in Q4FY20 was Rs 22,766.9 crore, and Rs 28,819.9 crore in Q3FY21.
 

Reported net interest margin (NIMs) are expected to settle in the range of 3.1-3.4 per cent, they say.
 

Provisions and PAT

Analysts, however, remain divided on the quantum of provisions that the lender may set aside during the quarter under review. While Nomura expects SBI’s provisions to decline 46 per cent YoY (and 29.4 per cent QoQ), ICICI Securities expects the same to rise 10 per cent YoY (and 44 per cent QoQ). Therefore, the expectations vary from Rs 7,302.6 crore to Rs 14,886 crore. 
 

Given such a deviation, the net profit estimates by the two brokerages vary enormously as well. Nomura’s net profit estimate, at Rs 11,822.2 crore (up 230 per cent YoY), remains an outlier on the upside while ICICI Securities’ estimate at Rs 4,704.6 crore (up 31 per cent YoY) is an outlier on the downside.

For rest of the brokerages including Motilal Oswal Financial Services, HDFC Securities, Emkay Global, and Kotak Institutional Equities, the PAT expectation ranges from Rs 5,928.1 crore to Rs 7,660 crore, up anywhere between 65.6 per cent and 114 per cent YoY from Rs 3,580.8 crore reported in Q4FY20. In the December quarter of FY21, the PAT was Rs 5,196.2 crore.

Asset quality and slippages

Emkay Global feels that SBI’s slippages may remain moderate with limited non-performing assets (NPAs) in retail and no lumpy corporate barring Srei. “However, agri-NPAs could be higher. Besides, Bhushan Power resolution should lead to lower NPA ratio sequentially,” it said.

Kotak Institutional Equities, meanwhile, opines that slippages could at 2 per cent of loans (adjusted for previous slippages while reported would be higher) led by the retail and SME portfolio. 

MOFSL sees the lender’s gross NPA ratio at 5.4 per cent and net NPA ratio at 1.9 per cent, up 60 bps and 7 bps sequentially, respectively.