SBI Q4 results outlook: Analysts predict profits of around Rs 4,000 crore

State Bank of India is among the stocks to watch today since the lender will be announcing its fourth quarter results for the last fiscal. And market experts say that the outlook is good. According to HDFC Securities, the country's largest lender is expected to report profit after tax of around Rs 4,000 crore "as LLPs [loan loss provisions] trend downwards".

In comparison, the bank had reported a massive net loss of Rs 7,718 crore in the same period last year. This was SBI's highest-ever quarterly loss, and had stemmed largely from the huge jump in provisions for non-performing assets (NPAs) under the Reserve Bank of India's revised framework for resolving stressed assets. The report further predicted that SBI's core earnings will grow at around 17% year-on-year - 3% over Q3 FY19 - as loan growth and net interest margins (NIMs) begin to look upwards.

Meanwhile, analysts at Elara Capital predict the profit after tax (PAT) at Rs 4,252 crore, up 7.6% quarter-on-quarter (q-o-q). The bank had posted a profit of Rs 3,955 crore in Q3FY19. A Bloomberg estimate of 19 analysts is reportedly even more optimistic - pegging profits at over Rs 4,840 crore in the quarter ended March.

SBI's net interest income (NII) is expected to register a single-digit growth on a sequential basis, albeit a double-digit growth over last year, The Business Standard reported. HDFC Securities, for one, expects NII to grow 16.8% y-o-y from Rs 19,974 crore in Q4 FY18, while it predicts a far more modest 2.8% jump on a sequential basis. Similarly, analysts at Phillip Capital expect NII to grow from Rs 22,691 crore in the December quarter to Rs 24,347 crore in the March quarter, up 7.3%, The Business Standard reported. "Low double-digit loan growth book along with stable NIM will drive NII," Phillip Capital added in an earnings preview note.

According to the daily, most analysts expect the slippages to remain muted with no fresh account getting classified as NPA. In the same period last year, SBI had reported fresh slippages at Rs 33,670 crore.

Phillip Capital sees slippages around Rs 10,000 crore in Q4 and expects strong recoveries from power sector accounts. "Slippages will mainly come from watch list," read its note, adding, "Containment of slippages and strong recovery from power sector NPA is likely to improve gross/net NPA (GNPA/NNPA)." SBI's GNPA ratio has already dropped from 10.91% in Q4 FY18 to 8.71% in the December quarter of the last fiscal. The NNPA ratio stood at 5.73% and 3.95% respectively.

Apart from asset quality, analysts say that the key monitorables include the impact of the bank's recent move to link its savings account interest rates to the repo rate, its outlook on growth and margins and the bank's commentary on the Supreme Court's judgment scrapping the RBI's February 12 circular. Moreover, the bank's exposure to beleaguered companies such as Essar Steel, Jet Airways and the IL&FS group will be closely watched.

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