BackSBI Q3 earnings today: 4 things to watch out for
More than SBI's profitability, the Street is awaiting asset quality trends to seek validation whether fresh additions to bad loan category are really slowing in the sector
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Mumbai: State Bank of India’s third quarter results are due later on Friday and more than profitability, the Street is awaiting asset quality trends to seek validation whether fresh additions to bad loan category are really slowing in the sector.
December quarter net profit is seen at Rs2,059.4 crore, according to a Bloomberg poll of 16 analysts. In the previous quarter last year, the bank reported a profit of Rs2,610 crore and Rs1,582 crore in the September quarter.
The results are not comparable from the year-ago period because SBI merged its five associate banks with effect from 1 April.
Here are four things the Street awaits clarity on.
Bad loans:
In the fiscal first half, fresh additions to non-performing assets stood at Rs35,275 crore as compared to Rs64,719 crore in the same period year. Analysts expect slippages in the third quarter to come from the bank’s watchlist of stressed loans, which currently stands at Rs21,288 crore. In case, most slippages come from the watchlist, it will be taken positive by the Street.
Provisions: Credit costs or the percentage of provisioning against total advances is expected to rise because of fresh loan slippages and the bank’s strategy to shore up provision coverage ratio. However, provisioning related to cases referred for insolvency proceedings is not expected to lead to sharp rise in credit cost as the bank had made adequate coverage. Additionally, the Street is also taking comfort from the fact that the bank has two additional buffers—stressed standard assets provisions of Rs7,916 crore and counter-cyclical provision buffer of Rs1,250 crore.
Profitability: SBI’s bottomline is seen under pressure because of higher provisioning and lower interest income. According to analysts, while net interest income, difference between interest earned, is seen under pressure because of lower loan growth, cut in deposit rates in the third quarter is likely to be supportive. Non-interest income is also seen down because muted treasury income as yields on government bonds rose sharply in the December quarter.
Loan growth: After a period of sluggishness, system loan growth has started reviving and touched the 10% mark in December. SBI’s outlook on the loan growth trend and projection for current and next fiscal year would be keenly awaited, especially in the light of recapitalisation of public sector bank. The bank had earlier guided for 5-6% loan growth in the current fiscal. In the September quarter, the bank had printed a growth of mere 0.95% with outstanding loans at Rs18.92 trillion.
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