SBI Q4 profit may increase over 60% YOY, say analysts

Net profit jump to be aided by up to 19% YOY growth in NII to ~32,100 crore

Government-owned State Bank of India (SBI) could report around 66 per cent year-on-year (YOY) growth in net profit for the January-march quarter (fourth quarter, or Q4) of 2021-2222 (QFY22), said analysts. This, they added, would be on the back of healthy improvement in net interest income (NII) and a strong credit book expansion.

SBI is scheduled to report its Q4 result on Friday (May 13).

According to brokerage estimates, SBI’S Q4 net profit could rise over a range of 63-72 per cent YOY to come anywhere between ~10,493 crore and ~11,056.7 crore.

SBI’S profit was ~8,432 crore in the third quarter (Q3) of FY22, and ~6,451 crore in Q4 of 2020-21 (FY21).

“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 added that a rise in bond yields could weigh on treasury gain and there could be a mark-down of its non-heldto-maturity portfolio.

Nonetheless, this increase in profit after tax (PAT) will also be supported by up to 19 per cent YOY, or 5 per cent quarter-on-quarter (QOQ), growth in NII at ~32,100 crore. Net interest income was ~27,067 crore in the year-ago period and ~30,687 crore in the Octoberdecember quarter of FY22.

However, extremely cautious and optimistic estimates peg SBI’S net profit at ~9,514.3 crore (up 47 per cent YOY), according to ICICI Securities, and ~12,900 crore (up 99 per cent YOY), conforming with Jefferies.

Loan and asset quality

According to ICICI Securities, SBI’S credit growth is expected to show improvement of 4 per cent QOQ and 9 per cent YOY at ~26.78 trillion, led by sequential uptick in retail, corporate, and overseas advances.

Global brokerage Citi, meanwhile, expects the loan book to grow 10 per cent YOY to ~26.84 trillion, from ~24.5 trillion in Q4FY21, and ~25.8 trillion in Q3FY22.

Deposits may have risen 7 per cent YOY and 2 per cent QOQ to ~39.43 trillion, from ~36.8 trillion in Q4FY21, and ~38.5 trillion in Q3FY22.

Against this backdrop, net interest margin (NIM) is seen moderating to 3-3.12 per cent, from 3.15 per cent in Q3FY22. NIM was 2.9 per cent in Q4FY21.

With regard to asset quality, Morgan Stanley believes the bank will continue to do well and bakes in normalised slippages of around ~5,000 crore (0.8 per cent of trailing loans, annualised), against ~2,580 crore in the last quarter.

ICICI Securities, too, says slippages (net of inter-quarter recoveries) were at a mere 40 basis points annualised run rate in Q3FY22 and their sustenance will be paramount.

The brokerage assigns gross non-performing asset (NPA) ratio at 4.3 per cent, 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 a quarterly basis, with brokerages estimating them between ~7,110 crore and ~10,040.7 crore — up from ~6,974.1 crore QOQ.