SBI Q4 profit may rise over 60% YoY but NIM could contract mildly: Analysts

SBI Q4 Preview: The increase in net profit would be aided by up to 19 per cent YoY/5 per cent QoQ growth in net interest income (NII) at Rs 32,100 crore

SBI Q4 Preview: Government-owned State Bank of India (SBI) could report around 66 per cent year-on-year (YoY) growth in its net profit for January to March quarter of FY22 (Q4FY22), analysts said. This, they added, would be on the back of a healthy improvement in net interest income (NII) and a strong credit book expansion. SBI is slated to report its Q4 result on Friday, May 13.
 

According to brokerage estimates, SBI’s Q4 net profit could rise in the range of 63-72 per cent YoY to come in between Rs 10,493 crore and Rs 11,056.7 crore. SBI’s profit was Rs 8,432 crore in Q3FY22, and Rs 6,451 crore in Q4FY21. 

"We expect net profit growth of around 63 per cent YoY on the back of nearly 7 per cent YoY growth in pre-provision profit, but capped by lower treasury income," analysts at Nomura wrote in their result preview report.

ICICI Securities, too, added that rise in bond yields would weigh on treasury gain and there would be mark-down of its non-HTM (held-till-maturity) portfolio.

Nonetheless, this increase in PAT would also be aided by up to 19 per cent YoY/5 per cent QoQ growth in NII at Rs 32,100 crore. Net Interest Income was Rs 27,067 crore in the year-ago period and Rs 30,687 crore in the December quarter of FY22.

That said, extremely cautious and optimistic estimates peg the net profit at Rs 9,514.3 crore (up 47 per cent YoY; ICICI Securities) and Rs 12,900 crore (up 99 per cent YoY; Jefferies), respectively.

Loans and asset quality

According to ICICI Securities, credit growth is expected to show improvement of 4 per cent QoQ and 9 per cent YoY at Rs 26.78 trillion led by sequential uptick in retail, corporate and overseas advances.
 

Global brokerage Citi, meanwhile, expects loan book to grow by 10 per cent YoY to Rs 26.84 trillion from Rs 24.5 trillion in Q4FY21, and Rs 25.8 trillion in Q3FY22. 

Deposits, on the other hand, may have risen by 7 per cent YoY and 2 per cent QoQ to Rs 39.43 trillion from Rs 36.8 trillion in Q4FY21, and Rs 38.5 trillion in Q3FY22. 

Against this backdrop, net interest margin is seen moderating to 3.00-3.12 per cent from 3.15 per cent in Q3FY22. NIM was 2.9 per cent in Q4FY21.

As regards asset quality, Morgan Stanley believes the bank will continue to do well and it bakes-in normalized slippages of around Rs 5,000 crore (0.8 per cent of trailing loans, annualized) as against Rs 2,580 crore in last quarter. 

ICICI Securities, too, says slippages (net of inter-quarter recoveries) were at a mere 40bps annualised run-rate in Q3FY22 and sustenance of the same will be key.

The brokerage pegs gross NPA ratio at 4.3 per cent as against 4.5 per cent QoQ and 5 per cent YoY. Net NPA ratio is seen at 1.2 per cent relative to 1.3 per cent QoQ and 1.5 per cent YoY. 

Provisions, however, may rise on quarterly basis with brokerages estimating the same between Rs 7,110 crore to Rs 10,040.7 crore, up from Rs 6,974.1 crore QoQ.