A major public sector lender is expected to report weak earnings for the third quarter on Saturday mainly due to higher operating expenses due to a pay review and pension costs.
Net interest is likely to grow around 6% year-on-year (YoY) in the December quarter, according to an average estimate of five brokerages. Net profit for the same period is seen declining 12% YoY.
Core operating profit could see a sharp 26% YoY drop in the third quarter, according to Nomura.
Key monitorables include the comments on unsecured loan growth, capital adequacy and loan book drawdown.
In the previous September quarter, SBI registered 8% YoY growth at Rs 14,330 crore and net interest increased over 12% YoY to Rs 39,500 crore.
Here’s what analysts expect from SBI’s Q3
Axis Assets
Go ahead and deposit growth to stay healthy. NII growth to be muted, NIMs could see compression of 5-7bps. PPOP to decrease on the back of wage revision costs. Credit cost to remain benign, Asset quality to continue improving trend.
Motilal Oswal
Higher OpEx due to increased investment. Expect earnings to decline due to higher wage provisions. Asset quality will improve further, supported by low-stress assets. Margin and supplies to be the key monitorables.
Kotak Equities
We expect operating profit growth to decline 18% YoY and NIM normalization. We are building 5% YoY NII growth due to 14% YoY loan growth.
Nuvama
We expect healthy loan growth of 3% QoQ. NIM is likely to decline marginally by 4bp QoQ. SBI has led for a shortfall of INR100 billion to the new wage deal, which will be spread over two quarters from H2FY24. In Q2FY24, SBI had a one-time salary provision of Rs 3400 crore.
Due to high base, opex for SBI will grow less sharply than other state-owned banks. Core PPOP (including recovery wages) will grow 1% QoQ higher than other state banks due to high opex base in Q2FY24. We expect slippage to rise to 0.8% from 0.6% QoQ due to the bank’s Rs 1250 crore funded exposure to BGR, but total credit cost will remain low at 23bp. The bank will not need to provide BGR because the account is paying but has slipped due to technical reasons.
(Disclaimer: Recommendations, suggestions, opinions and views given by the experts are their own. These do not represent the views of Economic Times)