SBI Q2 preview: Stake sale in SBI Life to aid performance; slippages eyed

State Bank of India (SBI), which is scheduled to report its September quarter earnings for financial year 2019-20 (Q2FY20) on Friday, October 25, is expected to post a decent set of numbers with gains from the stake sale in SBI Life to compensate for any negative earnings’ impact due to mark-down of deferred tax asset (DTA).

 

The largest public lender reported a net profit of Rs 944.9 crore in the corresponding quarter of the previous fiscal, and Rs 2,312.2 crore in Q1FY20. The net interest income (NII) came in at Rs 20,905.7 crore in Q2FY19, which was Rs 22,938.8 crore in Q1FY20.

Here is what leading brokerages expect:

Centrum Broking

Centrum estimates the bank to report a PAT at Rs 3,227.5 crore, up nearly 242 per cent relative to the corresponding quarter of the last year. NII is pegged at Rs 23,093.3 crore, up 10.5 per cent YoY and 0.7 per cent QoQ.

Prabhudas Lilladher

The brokerage sees the net profit at Rs 2,633.3 crore, up 178.7 per cent year-on-year (YoY), and 14 per cent sequentially. Gross non-performing asset (GNPA) ratio, according to them, should come in at 7.31 per cent on a yearly basis, but remain flat sequentially, in the recently concluded quarter.

“We expect the bank’s NII growth to remain at 12-13 per cent YoY with no large reversals as slippages to be lower than Q1FY20 (no agri/recovery PSU slippage) but we could see higher increments to stressed book (even the under RBI framework),” they wrote in a result’s preview note.

They peg the provisions at Rs 11,715.8 crore for Q2FY20, down 3.1 per cent YoY from Rs 12,099.2 crore reported in Q2FY19, but up nearly 28 per cent QoQ from Rs 9,182.9 crore (Q1FY20).

“Sale of shares in SBI life has led to Rs 3,000 crore of gain, which will mitigate DTA mark-down impact, assuming the mark-down is spread over three quarters” they wrote in a result preview note.

HDFC Securities

Analysts at HDFC Securities eye a 10 per cent YoY growth in the bank’s loan book and stable margins. “Net earnings could dip nearly 34 per cent QoQ due to Rs 1,500 crore DTA reversal,” the analysts wrote in a results preview note. They peg the pre-provision operating profit (PPOP) at Rs 16,410 crore on the back of stake sale in SBI Life.

“Additions to stress and the watch-list, comments on resolutions in existing NCLT and other known cases, and margin outlook post the linking of loans to external benchmarks would be the key monitorable,” it said.

ICICI Securities

On asset quality, analysts at ICICI Securities opine that slippages may stay elevated at Rs 10,000-12,000 crore but “resolution of Bhushan Power may lead in a reduction in GNPA”. The brokerage sees overall provisions moderating to Rs 9,000 crore from previous highs.