SBI Q3 profit may rise nearly 60% YoY; deposit growth could outrun peers

SBI Q3 preview: Brokerages believe the lender may report loan growth of 17-19 per cent year-on-year (YoY), in-line with industry growth

SBI Q3 preview: Country's largest state-owned lender State Bank of India (SBI) is slated to report its October-December quarter (Q3) results for financial year 2022-23 (FY23) on Friday, February 3.

Brokerages believe the lender may report loan growth of 17-19 per cent year-on-year (YoY), in-line with industry growth, while deposit growth could be around 10 per cent on year.

This, they said, would support net interest income (NII) improvement and margin expansion.

Consensus estimates by Bloomberg pegs NII at Rs 46,946 crore, up 19 per cent YoY (Rs 39,360 crore) and 6.6 per cent quarter-on-quarter (QoQ; Rs 44,058 crore). Net profit, meanwhile, is seen at Rs 13,196 crore, higher by 56.5 per cent YoY (Rs 8,432 crore) and down 0.5 per cent QoQ (Rs 13,265 crore).

On the bourses, shares of the bank chaired by Dinesh Khara advanced 15.5 per cent during the quarter under review. In comparison, the benchmark NIfty50 grew 6 per cent, while the Nifty Bank index added 11.2 per cent.

Here's what leading brokerages expect from SBI's Q3 results:
 

Nomura

The Japan-based brokerage's net profit forecast remains an outlier among estimates. It expects net profit to surge 79.2 per cent YoY to Rs 15,108 crore owing to stronger fee income. Sequentially, it would be a growth of 14 per cent.

Core pre-provision operating profit (PPOP) will trend better at 28 per cent YoY to Rs 23,038 crore, while PPOP may rise 27 per cent YoY to Rs 23,538 crore.

"Loan growth will likely be driven by all segments, but we expect retail loan growth to dominate. International loans and credit costs will be key monitorable," Nomura said.

It pegs NII at Rs 38,069 crore, up 24 per cent YoY/8 per cent QoQ.

Morgan Stanley

The brokerage expects loan growth to be 17.3 per cent YoY at Rs 30.25 trillion, up from Rs 25.78 trillion. Sequentially, loan book could grow 2.5 per cent.

Further, it expects net interest margin (NIM) to improve 15bps QoQ to 3.40 per cent as against adjusted margins of 3.26 per cent last quarter. This will be driven by repricing of loan book, which will be partly offset by rising cost of funds, it said.

NII growth is seen at over 21 per cent YoY at Rs 37,040 crore.

"We expect cost growth at 16 per cent YoY, mainly led by higher staff costs (13 per cent YoY/9 per cent QoQ) as we build in provision for the upcoming wage hike cycle from November 2022 onwards (i.e., for two months). We expect overall asset quality trends to remain comfortable. Slippages (net of intra-quarter recovery) are likely to remain benign at Rs 4,000 crore (0.6 per cent of trailing loans, non-annualised). We expect credit cost to remain benign at 53bps vs 42bps last quarter," Morgan Stanley said.

ICICI Securities

Robust loan growth of 17-18 per cent YoY to Rs 31.35 trillion is expected to continue in Q3FY23 while estimated deposit growth at 10 per cent YoY could keep the cost of funds elevated.

It anticipates slippages at around Rs 4,000 -5,000 crore. Overall NPA provisions are seen at Rs 4,500 crore. Investment provisions write-back may not be seen this quarter with yields stable.

Given this, it expects profit to be at Rs 12,560 crore, up 49 per cent YoY. NII is seen at Rs 36,222.3 crore.

Motilal Oswal Financial Services

MOFSL has pencilled-in NII growth of 23 per cent YoY (Rs 37,800 crore), and PAT growth at Rs almost 58 per cent YoY (Rs 13,290 crore).

It expects loan growth at 18 per cent YoY, while deposit growth is anticipated to be higher than consensus at 12 per cent YoY (Rs 43.2 trillion).

Moreover, the brokerage sees asset quality improving to 3.3 per cent at the gross NPA (GNPA) level vs 3.5 per cent QoQ. NNPA could stay stable at 0.8 per cent.

Operating expenditure (Opex), traction in deposits, and increase in deposit cost will be the key monitorables.

Emkay Global

The brokerage said that healthy growth/margin trajectory would continue for the bank in Q3FY23, but slightly-higher opex due to pension provision to contain PPoP growth at Rs 20,015.4 crore. NII is seen rising just 2 per cent sequentially at Rs 35,787.7 crore.

Moderate slippages, and better recoveries to drive down NPAs. Overall, net profit growth is pegged at just 35 per cent YoY, but down 14 per cent QoQ to Rs 11,371.3 crore.