SBI Q4 result preview: Profit growth may be muted; slippages to be watched

While analysts believe there may not be significant slippage, the classification of loans extended to Jet Airways and beleaguered infrastructure developer, IL&FS, will be keenly watched

State-owned State Bank of India (SBI) is scheduled to announce its March quarter results for 2018-19 on Friday midst expectations of flat growth in profit and a single-digit growth in net interest income (NII).

According to sector analysts, SBI is expected to post a net profit of around Rs 3,900 crore, up 0.3 per cent on a sequential basis.

Analysts at HDFC Securities, for instance, peg the net profit for the recently concluded quarter at Rs 3,970 crore on the back of a reduced loan loss provision (LLP), while those at Elara Capital remain optimistic and see the profit after tax (PAT) at Rs 4,252 crore, up 7.6 per cent quarter-on-quarter (q-o-q). The bank had incurred a loss of Rs 7,718 crore in the same quarter last year, but had posted a profit of Rs 3,955 crore in Q3FY19. 

SBI’s NII is also expected to register a single-digit growth on a sequential basis, albeit a double-digit growth on a y-o-y basis.

“Low double-digit loan growth book along with stable net interest margin (NIM) will drive NII,” said analysts at Phillip Capital in an earnings preview note. They expect NII to grow from Rs 22,691 crore (Q3FY19) to Rs 24,347 crore (Q4FY19), up 7.3 per cent. 

Analysts at HDFC Securities, however, expect the NII to grow a modest 2.8 per cent on a sequential basis. “Bank's earnings will also grow on, both, yearly and sequential basis supported by loan growth and positive NIMs," they said. SBI had earned NII of Rs 19,974 crore in the same quarter last year. 

SLIPPAGES

Most analysts expect the slippages to remain muted with no fresh account getting classified as a non-performing asset (NPA).

Phillip Capital sees slippages around Rs 10,000 crore in the recently concluded quarter and expects strong recoveries from power sector accounts. “Slippages will mainly come from watch list… Containment of slippages and strong recovery from power sector NPA is likely to improve gross/net NPA (GNPA/NNPA),” said a Phillip Capital result preview note. 

The state lender’s GNPA ratio was 8.71 per cent in Q3FY19, as compared to 10.91 per cent in Q4FY18. The NNPA ratio was 3.95 per cent and 5.73 per cent for respective periods.

EXPOSURE TO JET AIRWAYS, IL&FS

Among the other key monitorables is the exposure of the bank to now temporarily shut Jet Airways and the IL&FS group. The airline which owes close to Rs 8,000 crore to the entire banking sector, is indebted to the bank to the tune of Rs 2,000 crore.

Under a bankers-led provisional resolution plan (BLPRP) proposed for Jet Airways, lenders had to convert their debt to equity as per the rules laid down under the Reserve Bank of India’s (RBI) February 12, 2018 circular. The resolution plan, however, hit roadblock after the Supreme Court struck down the circular, terming it as “ultra vires”. 

“Asset quality due to slippages (out of) ‘watch-list’ and movement in Special Mention Account-II will be the key monitorables,” said analysts at HDFC Securities, adding that the bank’s commentary on the SC’s judgment on Feb 12 circular will be watched.